Reid Hoffman is learning an early rule of being a megadonor: It’s hard to keep track of your money

LinkedIn co-founder Reid Hoffman has burst onto the leaderboard of political donations in the age of Trump, cementing his status as a powerbroker in Silicon Valley politics.

But over the last few weeks, Hoffman has been learning one of the hard lessons that almost all billionaires discover as they leap into political combat: This isn’t all fun and rainbows. There is serious reputational risk in this dirty world — especially if you fail to scrutinize all of your newfound friends.

Hoffman on Wednesday issued a public apology for financing Kremlin-esque tactics in the 2017 special election for a Senate seat in Alabama, saying he was unaware that his largesse was behind disinformation tactics that boosted Sen. Doug Jones over Republican Roy Moore. The apology came in response to reporting from the Washington Post.

The incident, beyond being highly embarrassing to Hoffman, illustrates a bigger problem as Silicon Valley’s billionaires increasingly try to play political investor. Hoffman said he didn’t “track” the organization responsible — American Engagement Technologies — “more diligently.”

In the opaque world of politics, that’s a pretty normal struggle: Nonprofits donate to other nonprofits. Donors sometimes use limited liability corporations, or LLCs, to make contributions. Vendors are often paid through them, too.

So it’s not only reporters laboring to follow the money.

That’s why so many practiced tier-one political donors — from Sheldon Adelson to Tom Steyer — have sherpas working with them to vet political commitments. Hoffman does, too. But it’s hard work.

New donors will often get caught in the spider webs of “scam PACs” — political action committees that seemingly exist solely to make their leadership rich — that are woven anew every cycle. Major GOP donors felt they got burned during the 2012 presidential election, perturbed by the spending decisions of conservative super PACs helmed by strategist Karl Rove.

And, in fact, Hoffman himself and other ascendant Silicon Valley donors like Chris Sacca have tried to help the Democratic establishment be more tech-friendly and cost-effective.

So while Hoffman might be a political rookie, he’s accomplished enough and advised enough that he should know better.

In short, political investing — just like tech investing — can waste money, enrich marginal players and tarnish reputations.

“In my experience as a venture capitalist, I have adopted extremely high standards for my investments. They must perform well, but they also must be aboveboard, operating via honorable means,” Hoffman wrote on Wednesday. “I know first-hand that work doesn’t happen by accident. I’m fortunate to have a team that is rigorous in its diligence and I want to hold my political endeavors to the same standards.”

Any Silicon Valley titans envisioning themselves as political kingmakers should pay close attention.

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