Read somewhere that TGM VC/growth arm has done 60+ deals this year, averaging about 4 a week. Given that it's a lean team headcount-wise, how's this possible? What kind of diligence are they doing per investment? What do they see that makes them so bullish on tech? Anyone with any insight into their operations?
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They're not. They're giving growth-stage companies term sheets essentially after an initial meeting and maybe a unit economics calculation. They may seem crazy, but what they're actually doing is creating an index fund of sorts of growth-stage businesses. Everyone agrees growth is one of the most attractive spaces to be in right now, so rather than try to pick winners and losers they're trying to get a diversified piece of the whole market. We can argue about whether this strategy will work, but it is interesting to watch.
They still need to price it correctly though. If they were just following another lead on a deal you could make that argument, but if they are lead, their prices may be much higher than what would otherwise occur (winners curse in bidding). Or am I misunderstanding what they are doing?
And their prices are indeed much higher..
The scale of value creation in VC means it can be a lot less price-sensitive, investing at 750mm vs. 1bn vs. 1.5bn won't make a HUGE difference when it's a 50Bn company in [10 years]. If the IPO market crashes, then I mean they're sort of SOL either way, and that 250mm difference won't matter.
When you have 50B+ AUM you can start swinging for the fences and hope that one will turn into a home run
Wow, that pace is insane
Sounds like I'm in the wrong business and need to be in the growth company founder business...
Time to build a startup, fake it to the growth stage, then get a term sheet, cash out, and go home.
https://anchor.fm/the-informations-411/episodes/Techs-Tiger-King-euisl2
Thanks for sharing!
As other mentioned, they don't do proper DD (how could they with their lean team at this pace), this is not real "growth investing" in a traditional sense but rather building an index of all the up an coming names. Some will be flops, some will end up big. Reminds me of the early days of the Vision Fund, but on steroids.
I am doing growth at one of the large PE platforms and we consistenly lose out to Tiger, Coatue and the likes as we still do the traditional DD, like to dig deep and do a couple of weeks of detailed work while they just have the MP, take it at face value and throw a ridiculous term sheet at the owners (often also pre-MP) and then sign at a valuation that a rationale PE-type investor will not underwrite.
Frustrating to say the least, but let's see how this plays out for them. If you want to win against those guys these days you really need a proper relationship with the founders, owners or decision makers so that they want you for your value-add and specific expertise, otherwise it is tough to win. I know founders with Tiger-type shops in the share reg and they mention that they are completely hands-off as investors.
What are the implications of this? More overvalued companies hitting the public markets? Seems like they're kind of just kicking the can down the road.
This is just my thought, but public market tech company valuations still carry a significant premium over private tech company capital raises (at least in most cases I have observed). So the Tigers of the world could be counting on the public markets withstanding a higher multiple than the multiple paid by Tiger.
What's MP stand for?
Management presentation
Excellent overview of their rapid deployment investment strategy and how it contrasts to traditional VC/Growth: https://randle.substack.com/p/playing-different-games
Just read this yesterday, you beat me to it
What's most interesting is the LP perspective - seems like they don't care if returns are getting compressed as long as capital goes out the door. Anecdotally, have heard LPs say the same thing about LBO PE (although I can't imagine this level of napkin diligence for a control investor / mature business).
Begs the question, what happens if these returns converge with LBO PE or public equity?
Anyone have insight into SoftBank VS Tiger & how their approaches differ? Seems to be a better run Vision Fund in terms of thesis? Any other big differences?
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