23 highlights
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It would seem that in 2021, 72 hours is all it takes Tiger Global Management to decide if it is investing $20 million or less in your startup.
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Even with a pandemic, which seems to be going nowhere but is eager to take us with it, without guilt or malice, it is remarkable that India’s startup ecosystem is several degrees removed from either worry or pain. In fact, it is in the best shape it has ever been.
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And the two gentlemen running the show in India, sitting oceans away in the US, are Scott Shleifer and John Curtius.
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Partners at the firm, Curtius cuts cheques below $20 million, and Shleifer decides on anything larger.
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In the last six months, the firm has already cut cheques amounting to upwards of $1.3 billion. No other venture firm comes close in terms of this level of capital commitment in this short a time.
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The outcome of a strong resolve and a fat wallet is that Tiger is upending all traditional norms and understanding of the venture capital ecosystem. Take, for instance, the story of what happened when Tiger came knocking on Indian social network ShareChat’s door earlier this year.
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Just to humour Tiger, and no one expected any sort of follow-through on it, ShareChat said the entry price was at a valuation of $2 billion. Mind you, this is within days (not months) of the earlier funding round. No problem, said Tiger. And, just like that, the investment was done.
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Once it has made up its mind, it doesn’t care for much else. After they say yes, their due diligence is done by Bain & Co., which is mostly a negative due-diligence, nothing major.
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A few I spoke with said that Tiger has been keeping them busy too. They said Tiger’s investments are the single most important factor why the private markets are on fire, and never before have they felt the fear of missing out, or FOMO in millennial speak, so strongly.
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“They had done similar stuff in 2015,” said a partner at another venture firm. “But, overall, they will end up well because of two massive winners in Freshdesk and Razorpay. This is a legitimate strategy and has done very well for them.”
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Like how you or I would invest in say HDFC or ICICI Bank, they are bringing that investment style to startups. Whatever the price is, they’d like to enter and then wait it out. It is definitely an exciting strategy but so far Tiger has been the one which is leading the up rounds except in Byju’s, so we will have to wait and see how many of these companies go on to raise up rounds led by another investor after this.
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A founder, in whose company Tiger has invested in two rounds, said there’s a broad understanding of how Tiger does things. The first time Tiger invested in his company, it took five days flat.
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The other thing is they don’t get involved in the business. Unlike some other funds that get involved in the business post investment, one thing that I noticed about Tiger is that they had zero involvement in the company.
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They don’t identify companies. They do more thematic bets. If the theme is big, they will take the top layer and if the theme is broad-based, they will take 10 players and invest.
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There was a time when founders would get worried when investors invested in their competitors, but both Tiger and Sequoia must be credited with making this a normal venture investing practice. Nowadays no one bats an eyelid.
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This is also how any large fund invests in the public markets. “Tiger is able to pull it off because of the following reasons,” he said. “A) They don’t manage the investments so there are no time constraints. B) They are very disciplined to not fund portfolio companies if things are not working out unlike VC funds. C) They are able to double down aggressively and quickly if things are working out. D) They are trusting VCs from earlier rounds to filter for them.”
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In this, let’s call it the Tiger model, money trumps everything that’s usually associated with a high quality venture firm: qualities like founder friendliness, operational support to help a startup grow, playing the agony aunt, the whole spiel.
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Again, this is a vastly different investing approach compared to the likes of, say, a Prosus (earlier Naspers) or a SoftBank—both firms like to acquire higher stakes in their investments, get board seats and go very deep into building or augmenting operational capabilities in their portfolio companies.
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But not everyone can or should aim to become a Tiger Global. Because Tiger’s strategy rests entirely on the billions of dollars the fund is able to put together. Where the secret sauce is that even if you lose small amounts of money on failed ventures, doubling down on your winners could land you a pretty pile.
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Or in venture capital terminology, the quantum of capital a firm is able to raise from its limited partners, or LPs. This is where the likes of a Tiger or a Sequoia are leaving every other VC behind and sort of rewriting the investment playbook.
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At this juncture, allow me to add two other points which are contrarian in the Tiger narrative. One, it is not like Tiger always says yes. There are two very curious instances in the last month alone where Tiger has pulled term sheets, something that has taken quite a few people by surprise. One case is of Clear, earlier called Cleartax, which sells financial products and services. The second is Reshamandi, an agritech startup that is digitizing India’s silk supply chain.
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Which brings me to the second contrarian point, and this is about Lee Fixel, the former Tiger executive who is an expert on the India market and who quit the firm in 2019 to start his own $1.3 billion fund called Addition. Fixel is curiously absent from India, even as Tiger and the rest of the VCs are going bonkers.
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“It is a strange thing,” said the VC mentioned above. “The man who understands India the best is staying away. I think we all need to start asking why.”