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How Tiger Global crashed the VC party

How Tiger Global crashed the VC party

Good morning! This Monday, everyone loves to hate Tiger Global, Richard Branson went to space, China banned another 25 DiDi apps, and our favorite space documentary.

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The Big Story

Tiger's rise isn't SoftBank's fall

Venture capitalists once loved to curse the name of SoftBank. When the firm unveiled its $100 billion technology fund in 2017, it rewrote the rules of investing by deploying giant checks into startups and urging them to pursue radically ambitious visions. Some of those blew up along the way (WeWork investing in a surfing company should've been a major red flag), but the cash also helped portfolio companies like DoorDash win the food delivery market.

Then came Tiger Global. The New York hedge-fund has emerged as this year's funding jockey, and is the latest firm to have gotten under the skin of venture capitalists.

  • Tiger Global set a blistering pace for investment, having over 120 deals in the first half of 2021, according to PitchBook data. And there's more to come: The firm recently announced a $6.7 billion fund, and is rumored to be in talks for another $10 billion.
  • This comes at a time when venture capital is already shattering records. Investors shoveled $288 billion into startups in the first half of 2021, an increase of over $110 billion from the previous record, according to Crunchbase.

But Tiger's rise doesn't mean SoftBank is out of the picture. Quite the opposite, in fact.

  • The WeWork debacle and trouble with Uber's IPO at first cooled investor interest in SoftBank's second Vision Fund. But the firm decided to pony up the money itself after megahits like Coupang and DoorDash.
  • It recently upped the size of Vision Fund 2 to $30 billion of its own money and has invested in 90 companies so far.

Tiger and SoftBank were the two largest investors in startups in the first half of 2021, but the way each does a deal is entirely different.

  • SoftBank is a kingmaker, led by internet emperor Masayoshi "Masa" Son. All of the investments involve a pitch to the chief of SoftBank, who is said to back founders who inspire him and reward CEOs who have the biggest, most audacious plans. It likes to take board seats and be hands on with its investments.
  • Tiger Global is by contrast "proudly passive," an investor told me. "They're very clear on what they don't do. They stay out of your hair, they don't take board seats, they're not going to tell you how to run your company," said Outreach's Manny Medina, who raised from Tiger.

Tiger's new emphasis on speed is also turning Silicon Valley VCs away, just like SoftBank's giant checks annoyed them. Tiger studies and does much of its due diligence before it pounces on a deal, different from much of the relationship-building, slow-burn approach from traditional firms.

  • When Nylas CEO Gleb Polyakov told an investor that Tiger had given his company a term sheet, the VC abandoned the deal.
  • There's an "old boys' club" and a "process" that Silicon Valley VC firms like to follow, Polyakov said. "And if you don't follow the process they get very upset and very insulted, which seems a little silly."

Whether Tiger or SoftBank is the better investor is a question answered on the scale of years and not by the pace at which they're handing out money. The true winners so far? The founders, who are able to raise money faster from more deep-pocketed investors than ever before.

— Biz Carson (email | twitter)

A version of this story appeared on Protocol.com today. Read it here.

A MESSAGE FROM ANT GROUP

In 2020, U.S. merchants sold over $54 billion worth of products to Chinese customers on Alibaba's e-commerce platforms, which rely on Alipay to facilitate the transactions. The year prior to the pandemic, Chinese tourists in the U.S. engaged in 800,000 transactions using the Alipay App, for sales valued at $232 million.

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People Are Talking

Richard Branson made it to space yesterday and gave his own "one small step" speech:

  • "I was once a child with a dream looking up to the stars. Now I'm an adult in a spaceship looking down to our beautiful Earth. To the next generation of dreamers: If we can do this, just imagine what you can do."
After England players were subjected to racist abuse after the Euro soccer finals, shadow secretary of state Jo Stevens said it's time for more drastic social media reform:
  • "We need tough new laws, and we particularly need tough sanctions against social media platforms, to include ... criminal sanctions for senior executives. Because that's the only way we'll get them to change their behavior about how they run their companies."

Steve Wozniak doesn't invest in crypto, but he's here for it:

  • "Gold is limited and you have to look for it; bitcoin is the most amazing mathematical miracle."

Nextdoor picked a SPAC over an IPO, and Bill Gurley loves it:

  • "Sarah Friar is an extremely experienced CEO with tons of Wall Street experience, both having worked at an investment bank and as CFO of a public company. She dual-tracked it, was looking at the IPO and just said I have more control and get better economics by going the SPAC route."

Biden's executive order on competition gave Lina Khan a lot to do, and she's ready for it:

  • "This is an all-hands-on-deck moment to address unchecked market concentration and promote fair competition."

Barry Diller thinks streaming has already killed the movie theater:

  • "They ain't movies. They are some weird algorithmic process that has created things that last 100 minutes or so."

Coming this week

Elon Musk will testify today about SolarCity. He's part of a lawsuit claiming that Tesla's $2.5 billion acquisition of SolarCity "was burning through cash at an unsustainable rate."

"An Ugly Truth" comes out tomorrow. This is the book everyone in tech will be reading on vacation this month: It's expected to be a tell-all of Facebook's controversies over the past few years, and how Mark Zuckerberg became a wartime CEO.

Microsoft Inspire starts Wednesday. The event will be virtual for the second year, and we can expect to hear some new tech developments from the company.

In Other News

One More Thing

Your space prep awaits

Space travel is the talk of the week, and it likely won't die down until Jeff Bezos takes off July 20. It'll be a little while before the rest of us can go, but there are plenty of books, movies and podcasts that can at least give you a glimpse in the meantime:

  • A book: "We Have No Idea," by Jorge Cham. Truth is, we know little about the universe. Cham knows that, and teamed up with a particle physicist to write about everything we know — and don't know — about space.
  • A podcast: Houston We Have a Podcast. An official NASA show, with episodes ranging from the history of the International Space Station to everything astronauts do before a launch. Also, there's an episode called "Water Bears in Space." So, yeah.
  • A movie: "E.T." Our favorite space documentary! (Kidding.) Still, it's a necessary rewatch, and Branson even joked during his press conference yesterday that he saw an alien in space, so maybe E.T. isn't that far off.

Have another space-related rec? Respond to this email and let us know!

A MESSAGE FROM ANT GROUP

In 2020, U.S. merchants sold over $54 billion worth of products to Chinese customers on Alibaba's e-commerce platforms, which rely on Alipay to facilitate the transactions. The year prior to the pandemic, Chinese tourists in the U.S. engaged in 800,000 transactions using the Alipay App, for sales valued at $232 million.

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