Business Insider: How Tiger Global is beating other VCs, according to 6 startup founders who took its deals
Check out Agora and Dutchie in the article below!
Business Insider – August 30, 2021
By April Joyner, Candy Cheng, and Melia Russell
Tiger Global Management has built a reputation for being unorthodox in how it backs startups.
Insider spoke with six founders whom Tiger has backed about what sets the firm apart.
They said Tiger makes quick offers, doesn’t haggle over terms, and stays out of their way.
Earlier this summer, Maria Rioumine sat at her computer screen, brimming with excitement.
Less than two weeks before, she didn’t even have a pitch deck for her construction-tech startup, Agora, let alone plans to raise additional money for it. But that didn’t keep investors from calling her anyway.
Now she had several term sheets in hand, all from investors she highly respected. One firm stood out from the crowd, she told Insider: Tiger Global Management.
“They immediately understood the model and were ready to back us,” she said.
Tiger ended up leading Agora’s $33 million Series B round, which was announced earlier this month. It’s one of more than 200 investments the firm has made in 2021 alone, according to PitchBook.
Tiger, better known as a hedge fund, has made an overpowering entrance into the venture-capital world, outbidding even the largest, most respected venture firms to win deals. The brisk pace at which the firm writes checks has left other investors alternatively impressed, bemused, and frustrated.
To the many entrepreneurs who have chosen Tiger as an investor, its approach is a much-welcome change of pace.
Insider spoke with six founders backed by the investment firm about their fundraising experiences. They consistently pointed to three aspects that make Tiger a compelling investor: unusual speed in decision-making, uncomplicated terms, and an unobtrusive presence in their companies thereafter.
Pouncing on deals in just days
Having run startups for more than two decades, Beerud Sheth is accustomed to pitching investors. He cofounded Gupshup, a conversational-messaging service for sales, marketing, and customer support, in 2005.
But Sheth was surprised this year when he managed to raise $340 million for Gupshup in a matter of weeks, after initially setting out to raise only between $50 million and $100 million. He ended up splitting the round into two tranches, with the first being led by Tiger.
Sheth got a term sheet from Tiger three days after meeting with two of the firm’s partners, he told Insider.
From the outside, it may seem that Tiger swoops into deals with sudden, intense interest, but several founders said it was clear to them that the firm did extensive research on their companies well in advance.
For instance, John Curtius, who heads Tiger’s software investments, and Scott Shleifer, who cofounded and leads the firm’s private-equity business, often come to meetings with industry metrics and testimonials from customers already in hand, the founders said.
Tiger leans upon an expansive team of analysts and consultants, both in-house and through companies such as Bain & Co., to conduct research on prospective investments, several founders said.
That extensive legwork equips Tiger to make companies investment offers before they begin their formal fundraising process, a tactic known in the venture world as “preempting.” It also helps Tiger make lightning-fast decisions on terms once a founder expresses interest.
Rahul Vohra, the founder and CEO of the email company Superhuman, told Insider that Curtius offered him a term sheet just a couple of days after an initial conversation. Tiger, Vohra said, had already gathered “reams of feedback” about the company in that short time window.
Tiger’s background research isn’t always carried out in the shadows, either.
Ross Lipson, the CEO and cofounder of the cannabis-tech startup Dutchie, told Insider that he cultivated a relationship with Curtius over several years and kept him in the loop during the company’s previous rounds of funding. As Dutchie prepared to raise its $200 million Series C round earlier this year, the founder reached out to Curtius.
“Both sides pounced on it,” Lipson said.
‘Easily the fastest, smoothest process I’ve ever done’
And Tiger is not just fast. Its funding comes with generous terms and very few strings attached, several founders said.
For one, Tiger is known for outbidding other venture-capital firms, bolstered by its hefty $79 billion in assets under management.
Finbarr Taylor, the CEO of the e-commerce-software startup Shogun who has helped advise other companies considering investment offers from Tiger, told Insider that the firm has been known to take less equity than its competitors in exchange for its investment. Series A investors classically want 20%, but Tiger is known to take deals for less than that.
In an extreme example, a startup called Vendr announced a $60 million Series A round led by Tiger in March that valued the company at $600 million. That’s equivalent to the sale of a 10% stake.
It should be noted that in this intense bull market, other venture-capital firms have been willing to bow on the size of their stakes, too, to perhaps 15%, sources said.
Tiger also keeps its term sheets simple, which makes the negotiation process easy, several founders said.
Sheth of Gupshup, for instance, said he noticed that Tiger’s term sheet was surprisingly concise, even though the round the firm led was the largest he’d ever raised.
Typically, Sheth said, he’d have to negotiate with investors over details such as the allotment of board seats, the circumstances under which the company required board approval for executive decisions, and the number of times a year the company was obligated to provide updates to investors.
But none of those fine-print details mattered to Tiger. “It’s easily the fastest, smoothest process I’ve ever done,” Sheth said.
One catch is that the generous funding doesn’t necessarily come with support for founders. Tiger rarely takes board seats, and several founders said the firm preferred to take a hands-off approach.
That could leave startups — especially those sporting the lofty valuations that Tiger readily agrees to — at a big disadvantage should they falter later on. One investor previously told Insider that firms such as Tiger were likely to cut their losses rather than work to bail out their struggling portfolio companies.
However, according to a person familiar with Tiger’s strategy, the firm increased investments in a number of companies that struggled during the pandemic and helps underperforming companies solve their issues.
For later-stage companies, limited contact makes sense, several founders said. At that point, they need capital more than they need additional advice.
“I think the product Tiger is offering is excellent for companies that are growing and primarily want cash, not another voice in the room,” one founder of a software startup said.
More than a check — if you want
But other founders said Tiger brought more to the table than just big checks, such as access to its broader network. Superhuman’s Vohra said that’s been useful as his company grows and attracts larger corporations as customers. In fact, he said, Curtius pointed to that resource as a perk of working with Tiger.
The firm’s vast reach into both private and public markets, across an array of industries and geographies, is also a selling point for several founders.
Santiago Sosa, the CEO of the e-commerce software startup Nuvemshop, told Insider he found Tiger’s strong network especially valuable, given his plans to expand the company beyond its Latin American base. He recently raised $500 million of funding in a round led by Tiger that valued the company at $3.1 billion.
Similarly, Sheth, who said he hoped for Gupshup to pursue an initial public offering, sought out Tiger’s experience working with companies to go public. While Tiger’s partners don’t demand much oversight over the companies they back, they are happy to lend advice, he said.
“We talk to them all the time,” he said. “They’ve been very supportive to the extent that we need it.”