Two years ago, venture firm Social Capital raised $600 million for its third fund. Today, many of its LPs tell me that they are upset – and it has little to do with that strange unicorn-hunting SPAC.

Backstory: Social Capital was founded in 2011 by former Facebook exec Chamath Palihapitiya and U.S. Venture Partners vets Mamoon Hamid and Ted Maidenberg. Investments would include Box, Slack and Wealthfront. By last year, however, Palihapitiya had grown disenchanted with traditional, early-stage venture capital, saying both publicly and privately that the model needed to be severely disrupted (including at an annual meeting where he compared his firm to past expanders like Blackstone Group and Berkshire Hathaway). So he continued to manage a side hedge fund, and earlier this year recruited Marc Mezvinsky (Mr. Chelsea Clinton to you) as vice chairman to expand into other financial products. Then came the addition of ex-GoPro exec Tony Bates to run a growth equity unit. Somewhere along the way, Palihapitiya also retitled himself CEO.

While Hamid was on paternity leave this past summer, Palihapitiya basically told Maidenberg that he wanted the venture fund to go in a different direction, with a much greater emphasis on data. The pair did not see eye-to-eye, and reached an agreement whereby Maidenberg would remain for two years to help manage out the portfolio (he and Hamid each have nearly a dozen board seats). What Palihapitiya didn't realize, however, was that Hamid – viewed by most LPs as the fund's major rainmaker – was already deep into discussions to leave for Kleiner Perkins. In other words, the backup plan was bailing. When Palihapitiya told Hamid about Maidenberg's quasi-departure, Hamid disclosed his plans (before having the opportunity to inform Maidenberg). Soon after, the Hamid-to-KP news was announced. Maidenberg continues to manage his portfolio companies, but is no longer hanging out at the Social Capital office, and multiple sources say the lines of communication between him and Palihapitiya are effectively severed.

LP anger: The issue for LPs is twofold: First, the team they backed is no longer really there. Second, the strategy they backed (i.e., fairly traditional VC) is no longer being employed. Fund III remains less than 70% called, and there continue to be questions about future portfolio monitoring, and whether junior members of the investment team – folks who partially joined to be mentored in venture by Hamid and Maidenberg -- will stick around (a headhunter tells me some resumes are out). "I'm really disappointed in the whole thing," one longtime Social Capital LP tells me. "Chamath is a smart guy, but he's really gone off the rails." Another adds: "It's one thing to want to be Blackstone or Berkshire, but not before putting point on the board in your original business, which we and others underwrote without worrying that the strategy would drastically shift mid-fund."

But... There isn't too much LPs can really do. Fund III doesn't have a no-fault divorce clause, and Palihapitiya is the only key-man listed ("We blew it on key-man," a third LP says). Some LPs would prefer Maidenberg to run the remaining money, but Palihapitiya is said to have not yet been receptive to that plan.

Social Capital statement: "We want to build a modern, scalable organization capable of supporting entrepreneurs and startups all the way from inception to their life as a public company. We are excited about what we are building, and the largest investors in Social Capital are behind our approach."

Also this morning:

• M&A break: Intel CEO Brian Krzanich tells Axios' Ina Fried that his company is slowing down on the big acquisition front, after recently spending $15 billion on Mobileye: "I think you can only take on so much at a time and you need to stop and breathe and let the organization breathe and re-form."
• Uh oh: It seems that Beijing has banned commercial advertising on bicycles, which could eat into revenue for those Chinese bike-share startups that have raised hundreds of millions of dollars at unicorn valuations.
• From the mouths of regulators: Kia spotted the following tweet from the SEC's San Francisco regional office: Virtual currency + Ponzi scheme = really bad investment.
• Unconventional wisdom: I recently chatted with venture capitalist Hans Tung about why he and his firm (GGV Capital) continue to back e-commerce startups in the Age of Amazon. His deals in the space have included Wish, Poshmark and OfferUp. We touch on differentiation, Amazon's tendency to private-label, Walmart's role in the retail ecosystem and if he sees another Whole Foods-type deal on the horizon. Read the Q&A by going here.

Toys "R" Us has filed for Chapter 11 bankruptcy protection, 12 years after being taken private in what now appears to have been an over-leveraged buyout. The New Jersey-based retailer also announced that it has secured $3 billion in debtor-in-possession financing from J.P. Morgan, which will be used to support ongoing operations (although some of the company's 1,600 stores are almost certain to be shuttered).

• Why it's the BFD: Toys "R" Us remains a massive company, with nearly 65,000 employees. And what comes next could be devastating for many of them.
• Timing, per WSJ: "The filing... was triggered by vendors and suppliers tightening terms with the company ahead of the key holiday selling season, which accounted for 40% of its $11.5 billion in revenue last year. For the past several years, the company has lost money in each quarter except its holiday quarter."
• Timing (cont): This is also about balance sheet, as Toys "R" Us has around $5 billion in debt, of which $400 million was scheduled to come due next May. It has kicked the loan can down the road in the past, but apparently found a brick wall this time around.
• Big bidder? The original buyout included not only Bain Capital and KKR, but also a publicly-traded REIT called Vornado. It later wrote down its equity value in Toys to zero, but the legacy exposure could perhaps prompt Vornado to buy up some of the retailer's still-unleased property via the Chapter 11 process.
• Bottom line: Toys "R" Us is a specialty retailer that is no longer special enough, unable to break through the commoditized clutter of discounted generalists like like Amazon, Target and Walmart.

• BASF of Germany has agreed to acquire the global polyamide business of Dutch chemicals company Solvay for €1.6 billion. http://reut.rs/2hfblee

⛽ China General Nuclear Power Corp. is in talks to invest in NuGen, a British nuclear power plant project valued at between $15 billion and $20 billion. No terms of the possible equity bid were disclosed. http://reut.rs/2fwPyhX

⛽ Itron (Nasdaq: ITRI) has agreed to acquire smart energy networking platform Silver Spring Networks (NYSE: SSNI) for around $830 million in cash, or $16.25 per share (25% premium to Friday's close). http://reut.rs/2hfPbZh

• Sarah Alexander has joined the Global Innovation Fund as a senior advisor and investment committee member. She previously was a managing director with the Abraaj Group and, before that, led the Emerging Markets Private Equity Association.

• Atlas Merchant Capital, the private equity firm led by ex-Barclays CEO Bob Diamond, has fired Anthimos Thomopoulos as CEO of portfolio company Credicom, after learning that he is under investigation by Greece's central bank. http://on.ft.com/2wEl03K

• Andrew Cialino has joined SFW Capital Partners as a VP and head of business development. He previously was head of sales for Axial. www.sfwcap.com

• Credit Suisse has named Mathew Cestar and Jens Welter as its co-heads of investment banking and capital markets for EMEA (succeeding Marisa Drew and Mark Echlin, who both will remain with Credit Suisse in other positions). http://on.wsj.com/2ymM1Lc

• Kito de Boer has joined The Abraaj Group as managing partner. He spent 29 years with McKinsey & Co. before becoming a diplomat and Head of Mission of the Office of the Quartet. www.abraaj.com

🚑 Moncef Slaoui, former chairman of pharma R&D and vaccines for GlaxoSmithKline, has joined European life sciences VC firm Medicxi as a partner. www.medicxiventures.com