Why Tiger Global’s ferocious roar has turned into a soft mewl

Prolific Investor

Founded successful 2001 by Chase Coleman III, Tiger Global recovered aboriginal occurrence done its hedge funds and its nationalist marketplace funds which invested successful the US exertion stocks.

In emerging markets, it burnished its estimation successful China wherever it made a sidesplitting done investments successful JD.com, present the country’s largest retailer by revenue, and Didi Global, a ride-hailing app similar Uber. According to a Wall Sreet Journal article, Tiger made $5 cardinal successful gains from its $200 cardinal concern into JD.com.

In India, Tiger Global is known to person backed implicit 160 companies. Its biggest bets see Flipkart, Just Dial, MakemyTrip, and much recently, Zomato, Ola Cabs and Ola Electric. Tiger’s champion exit from India is Flipkart, wherever it sold its involvement for $3.5 billion, an astir 3x instrumentality connected its full concern of $1.2 billion, according to fiscal website Institutional Investor. In addition, a Financial Express portion from 2015 said that it made an 18x instrumentality retired of Just Dial.

Today, however, Tiger Global’s roar is gone and the assertive beast is simply a airy shadiness of its erstwhile self.

A Rough Patch

In the past 2 years, Tiger’s bonzer way grounds has taken a deed aft US tech stocks plummeted successful the aftermath of a spike successful involvement rates, which sucked sentiment retired of the market. Overvalued tech stocks saw their worth erode astir overnight. In galore cases, this besides impacted the valuation of the backstage market.

Since then, the capitalist has cooled disconnected and has lone been making small, follow-on investments astatine little valuations. To beryllium fair, Tiger Global isn’t the lone capitalist to person taken a deed connected its investments. Softbank Group, for instance, saw a immense wipeout successful its Vision fund.

Most tech investors, including Alphawave Innovation, Accel Partners, Lightspeed Ventures and Peak XV Ventures, person besides mostly been quiescent successful late-stage investments and person switched their absorption to early-stage investing.

Tiger Global isn’t the lone capitalist to person taken a deed connected its investments. Softbank Group, for instance, saw a immense wipeout successful its Vision fund.

Tiger Global has already taken writedowns successful its PIP15 money to the tune of astatine slightest 18%, according to a Bloomberg study connected 1 December 2023. In April 2024, Tiger Global raised PIP 16 (its 16th fund), which closed astatine $2.27 billion, good beneath its people corpus of $6 cardinal and acold little than its earlier fund.

The investor’s portfolio downturn played retired much successful 2022. It reported a 56% deed to its hedge money and a 69% deed connected its long-only fund, according to a Bloomberg study past year. Tiger Global besides marked down its backstage funds portfolio.

Last November, laminitis Coleman took nonstop power of the backstage markets portfolio, aft Scott Schleifer stepped down arsenic caput of the backstage equity fund.

Mint reached retired to Tiger Global but the US-based capitalist did not connection immoderate comment.

An Evangelist for India

Tiger Global’s thrust into the Indian tech ecosystem was driven by a consciousness of exceptionalism. It made a flurry of investments and acceptable the benchmark for valuations. Most founders successful the ecosystem wanted to beryllium connected its radar. As a result, the money has accumulated important goodwill among founders successful India, peculiarly due to the fact that of its “light touch", “decisiveness" and backing of founders. And due to the fact that typically, Tiger Global does not instrumentality a committee spot connected companies successful its portfolio.

“Tiger had decided that its worth was successful providing the astir ‘frictionless’ process for fundraising," according to a unicorn founder, who ended up raising superior from the money successful a mates of days. “Once they determine to backmost you, they are improbable to resistance retired of the dialog oregon quibble astir the valuation," the laminitis said.

This was particularly disposable erstwhile Tiger Global was investing successful India successful 2015 and 2016 erstwhile it was penning cheques astatine a ferocious gait that would lone summation during the highest of 2021. A 2023 Forbes nonfiction said that Tiger ended up backing 1 startup a time passim 2021.

Tiger Global backed companies that already had different marquee investors successful place. This allowed it to trust connected an archetypal furniture of diligence done by those investors.

In immoderate cases, it would determination wealth into a clump of companies successful the aforesaid segment, with the volition of backing them done their nationalist marketplace debut. For instance, it bought into aggregate edtech firms, including Byju’s, Unacademy, Classplus and Scaler. In the neobank segment, it invested successful Jupiter and Open. In payments, it is an capitalist successful BharatPe, Razorpay, PhonePe and Cred. In the broking segment, it is an capitalist successful some Upstox and Groww. Similarly, it has backed some Games24X7 and Dream11 successful the gaming segment. And successful SaaS (software arsenic a service), it has invested successful the likes of Chargebee and Innovacer, among others.

Tiger Global besides backed companies that already had different marquee investors successful place. This allowed it to trust connected an archetypal furniture of diligence done by those investors. But the founders cited supra said that the steadfast besides relied connected its ain diligence. “They instrumentality a presumption connected the assemblage earlier investing," said 1 founder.

“After they invested successful us, we heard from 8 to 9 radical successful our web that they had received a telephone from Tiger," added a 2nd founder.

Entering astatine the Peak

Tiger Global ended up flooding the ecosystem with inexpensive money, investing astatine precocious valuations astatine the highest of the rhythm successful 2020 and 2021. Apart from entering astatine the top, the inclination to not negociate connected valuations fuelled galore startups to caller highs. Having raised 3 back-to-back funds successful 2020 ($3.75 billion), 2021 ($6.67 billion) and 2022 ($12.7 billion), it invested successful respective startups betwixt 2020 and 2022 astatine their highest-ever valuation.

For instance, Tiger Global invested successful Byju’s successful January 2020 and successful consequent rounds. It is thought to person enactment successful adjacent to $300 cardinal successful Byju’s, which it is improbable to recover, fixed the ineligible battles the institution is engaged in. Tiger is not the lone 1 to person burnt its fingers investing successful Byjus; respective marquee investors, specified arsenic Prosus, General Atlantic, and Baron Capital, basal to suffer their superior successful the edtech. Global investors enactment successful implicit $5 cardinal successful Byju’s, with lone aboriginal investors specified arsenic Lightspeed Ventures oregon Peak XV Ventures seeing returns connected their capital.

Tiger Global’s investments astatine highest valuations successful companies specified arsenic Pristyn Care, BharatPe and ShareChat look particularly weak.

Apart from Byju’s, backmost successful 2020 and 2021, Tiger was besides investing successful different startups specified arsenic OfBusiness and its portion Oxyzo Financial Services, BharatPe, DealShare, Pharmeasy, Unacademy, ShareChat, Slice, Pristyn Care, GoMechanic and CoinSwitch Kuber.

Barring Ofbusiness and Oxyzo, galore of these investments person turned into duds, portion others person struggled due to the fact that of valuation markdowns and consequent pivots. A fewer of these companies are besides trying to turn into their valuations and are improbable to beryllium capable to rise much superior astatine erstwhile valuations.

Tiger Global’s investments astatine highest valuations successful companies specified arsenic Pristyn Care, BharatPe and ShareChat look particularly weak. Its investments crossed edtech are besides improbable to wage off, fixed the depressed sentiment successful the sector. Smaller investments similar GoMechanic person sunk due to the fact that of fraud.

“Most of Tiger’s investments aft the Lee Fixel epoch person not done well," said 1 investor, who has tracked Tiger Global.

The Fixel Era

Lee Fixel, who had a 13-year stint successful Tiger Global until 2019, was an evangelist who helped enactment Indian startups connected the planetary radar astatine a clip erstwhile not galore had heard of them. His best-known investments were successful Flipkart, Ola and Delhivery. Numerous others besides got backing acknowledgment to his assertive calls.

Fixel led Tiger’s investments successful Flipkart implicit 15 rounds, investing $1.2 cardinal from 2011 till its implicit exit from the e-commerce marketplace successful 2023.

Fixel near Tiger Global 5 years agone to commencement his ain firm, Addition. In June 2023, tech-focused quality website Techcrunch reported that Addition was raising a $1.3 cardinal fund, its 5th money successful 4 years.

But nether Fixel too, Tiger made immoderate mediocre investments successful India, specified arsenic Quickr, Shopclues and Hike Messenger. However, determination were nary ample blowups owed to mediocre firm governance, arsenic happened with GoMechanic and Byju’s.

Also, by 2017, Tiger had partially derisked its India portfolio, pulling retired adjacent to $1.7 cardinal aft making partial exits from Flipkart and Ola Cabs, a VCCircle report from the clip said.

Even with Flipkart, it was “touch and go" for a while, with the startup going done 3 near-death experiences, said the tech capitalist cited above, seeking anonymity arsenic helium was speaking astir a peer. Tiger Global yet made its partner, Kalyan Krishnamurthy, the caput of Flipkart, pushing the company’s founders to the sidelines, earlier it was yet sold to Walmart.

It could besides beryllium argued that Tiger’s bets successful the post-Fixel epoch are yet to play out. Investors specified arsenic Tiger put done funds that person a ten-year tenure.

Nevertheless, Institutional Investor quotes laminitis and existent brag Coleman arsenic saying helium wished the steadfast had “invested a spot less" successful 2020 and 2021, successful a telephone with the firm’s investors successful January 2024. “Every vintage twelvemonth up done 2020 was positive; 2021 and 2022 are the tougher vintage years," Coleman said.

Early Exits Ahead?

The downturn successful tech stocks triggered redemption unit from Tiger Global’s investors. The money exited aggregate liquid positions to negociate this unit crossed 2022 and 2023. From India, Tiger Global booked retired astatine slightest $3.25 cardinal during this period, according to quality website VCCircle. This included $1 cardinal to $1.4 cardinal each from its residual stakes successful Flipkart and Freshworks, successful summation to holdings successful different companies specified arsenic Delhivery, Policybazaar and Zomato.

Because they were made earlier 2015, immoderate of these investments inactive turned retired to beryllium profitable, contempt the exit taking spot successful the mediate of a downturn. For instance, the quality website Arc said that Tiger made a 5x nett from its Policybazaar exit.

But immoderate intelligibly were mistimed exits. Tiger Global archetypal entered Zomato straight up of its archetypal nationalist offering successful 2020, erstwhile the food-delivery level was valued astatine astir $3.25 billion, and past invested again a fewer months down the enactment astatine a valuation of $3.9 billion, according to VCCEdge, HT Media’s information platform. It added to the concern successful Zomato astatine astir $5.4 cardinal successful February 2021. Tiger was besides an aboriginal capitalist successful Blinkit, successful 2015. After Zomato acquired Blinkit successful February 2022, Tiger acquired further shares successful Zomato due to the fact that of the stock swap astatine the time. However, erstwhile it began selling Zomato banal successful August 2022, the shares were trading astatine astir ₹46-52 apiece. It afloat exited the steadfast astatine ₹91 a portion successful August 2023. Tiger Global’s aggregate connected its investments successful Zomato is apt to beryllium little than 1.5x, according to VCCircle.

The speedy exit besides meant that it wholly missed retired connected Zomato’s revival. The nutrient transportation institution has touched its all-time precocious successful 2024 ( ₹213.80 connected the BSE) and is presently trading astatine ₹207.30. Nearly 50% of its valuation is due to the fact that of Blinkit, which Tiger missed retired connected due to the fact that of its mistimed exit.

Silver Linings

On a brighter note, Tiger inactive owns stakes successful much than a fistful of decent-sized Indian unicorns. As companies successful its SaaS, gaming and fintech portfolio statesman to spell public, these bets volition commencement paying off.

Tiger Global’s inclination to hold till a company’s IPO whitethorn mean that implicit 18-24 months, arsenic these companies marque their nationalist debut, it volition spot its gains from India improve. Some of the larger startups, specified arsenic Groww, Razorpay, PhonePe and Gupshup, person already outlined plans to database successful the mean term.

Earlier this month, the GST assembly recommended that the authorities overrule retrospective taxation demands against existent wealth gaming companies, giving much-needed alleviation to Tiger-backed companies specified arsenic Dream11 and Games 24x7.

Tiger Global’s concern attack implicit the past twelvemonth has been tamer.

Because of the smaller size of the fund, and possibly due to the fact that of the paucity of assets successful the market, it has mostly restricted itself to follow-on investments.

The downturn successful the marketplace has meant that it could marque these investments astatine little valuations. For instance, Tiger entered Meesho successful March 2024 erstwhile the e-commerce level raised superior astatine a discount to its 2021 valuation. With Coleman backmost astatine the helm, this whitethorn beryllium a motion of things to come.

For investors specified arsenic Skywalker, this is the hope—that the remaining unicorns volition spell nationalist aft they turn into their valuations. The household bureau has present moved connected to absorption connected investing successful vigor transition, peculiarly lithium-ion artillery recycling. On whether this displacement from tech was prompted by Tiger Global’s disappointing performance, Padiyath, exuding confidence, indicated helium expected that concern to wage disconnected successful time. “It is excessively aboriginal to measure the fund’s show arsenic it has lone been 3 years," helium told Mint.

Padiyath is counting connected Tiger’s flair for uncovering moonshots to wage disconnected implicit the coming years. “Typically task superior funds spell done cycles. They volition spot each sorts of phases. This is 1 of those hard times. Only radical who person got diligent superior tin get into task funds, hence we are not disquieted excessively much," helium said. “Because we are diligent investors."