Tiger Global’s relationship with India

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Today’s, Publisher’s Parmesan covers Tiger Global and its strategy for India amid the bad news all around.

For context, Scott Shleifer, Tiger Global Management’s head of private investments, was in Bengaluru last November to meet the executives of Indian startups backed by the VC firm.

After meeting his Indian investees, Shleifer proclaimed that India was the ‘silver lining’ amid the global gloom.

This was in stark contrast to what the firm was facing in the US. Over the last few months, it has either pared or exited some of its major investments, including Microsoft, Zoom, DoorDash, and Coinbase, among others. It has also paused future investments in China owing to economic and geopolitical concerns.

Let’s start with the curation first.

The Quote󠀢 💭

The Tweet 🐦

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The Infographic 💹

The squeeze on incomes will continue to restrict consumer spending, in real terms, over the coming months. 📉

The Short Read 📝

Putting Time In Perspective - by Wait But Why

As they say, time is your most precious asset. While this makes sense theoretically, it is very hard to practice. This 10-year-old article helps put the time in perspective.

Starting from a single 24-hour day, this article contextualises our existence on the spectrum of time. From the beginning of the universe to its eventual end, this article takes you on a journey across time. Fascinating, isn’t it? 🤠🤯

The Long Read 📜

How to make the leap from consulting to a startup - by Julia DeWahl

Julia DeWahl is an early-stage investor and advisor. Till recently, she was associated with Starlink at SpaceX. Prior to that, she was an early employee at Opendoor and a consultant at Bain & Company.

While consulting firms have been around for decades and have well-recognized brands, startups are by definition lesser-known entities. There is therefore a lot more onus on you to assess the startup you may join to ensure it has high potential.

Publisher’s Parmesan 🧀

Tiger Global’s relationship with India

The past year has been unkind for Tiger Global. It lost tens of billions of dollars in both its private and public portfolios. This change in fortunes couldn't have been more drastic. In 2021, the group participated in a record 335 deals worldwide, over 50 of which were in India. But as the losses mount, the VC giant has started diversifying its bets. Yes, and with that, it has started investing in early-stage startups through small cheques.

Taking bets on Indian startups is hardly new for Tiger Global. It has backed and reaped handsome returns with e-commerce giant Flipkart (acquired by US retail major Walmart in 2018) and food-delivery behemoth Zomato (went public in 2021).

Over the past two years, as Tiger Global expanded its portfolio, Indian startups benefited significantly from its largesse. It reportedly put in $2.25B in Indian startups, the highest by any venture capital (VC) fund in 2021. While it backed 335 deals worldwide, a 4X jump from 2020, as many as 52 of those, involving over 20 unicorns, were in India. More than even Japanese investor SoftBank.

But as 2022 progressed, Tiger Global-backed companies’ fortunes turned for the worse. The economic downturn precipitated by rising interest rates aimed at curbing high inflation has hurt Tiger Global’s big bets. While Stripe’s valuation fell by 28% to $74B, that of Bytedance, TikTok’s parent, slid by 25% to below $300B.

In India, its portfolio firms including unicorns like Unacademy (edtech), PharmEasy (e-pharmacy), and Innovaccer (digital healthcare) have laid off hundreds of employees to reduce their cash burn. PharmEasy even withdrew its pre-IPO draft papers in August, citing market conditions.

Today, Tiger Global is staring at historic losses. It has marked down the value of its private funds by ~25%, translating to a $42B decline in its assets. Its public-investment arm has contracted ~60% to $15B.

Keeping up with the times, Tiger Global has updated its operating strategy in the country. It is now resorting to increased scrutiny of its existing investments along with a nuanced approach to writing cheques.

Softening its hands-off approach

Some startups suggest that, in 2021, direct interactions between them and the VC had reduced to “once in many, many months”. Receiving monthly updates used to suffice. But it has reversed now. There are many more requests for changes in the metrics or new metrics that need to be sent every month.

Tiger Global is also shedding its non-interventionist stance. “If you don’t do this, your firm will suffer.” It is sending out a subtle but clear message to startups that things cannot run the same way they did last year.

In the coming days, it would likely act strongly to protect its investments, especially the larger ones, if things go further south. It might even push very hard to sell secondaries in firms it has lost interest in. Also, it’s not impossible that Tiger will get its hands dirty with governance if an investment is too large to be written off.

Smaller cheques and diversified bets

Something which was unheard of is happening now. Tiger Global is now taking part in smaller funding rounds and cutting smaller cheques.

Recently, it led Series A and B rounds in “younger” firms like software-as-a-service firm Toplyne and savings-and-investment platform Jar. This takes its Series A fundraises to eight from just three a year ago. Furthermore, it also led its first two seed rounds - checkout-suite provider Shopflo and blockchain-based gaming platform Lysto.

Meanwhile, Tiger Global is actively taking cues from its existing portfolio which includes multiple unicorns. It is looking to avoid investing in other ‘soonicorns’ in the same sector to minimize exposure in one “risk bucket”.

This is visible in their recent bets on microblogging platform Koo, battery-swapping startup Battery Smart, blockchain-tech firms such as Lysto and Polygon, and restaurant chain Chaayos.

A difficult bargain for both Tiger Global and the startups

For early-stage Indian startups that want Tiger Global on their cap table, this has been, quite counterintuitively, a good year. But at the same time, the founders are unsure about what to expect from Tiger Global’s laissez-faire attitude.

Getting capital from Tiger Global acts as a big approval and is a big signal to other investors. Besides, the VC also provides founders with access to an incredibly large and diverse pool of fellow founders. But taking small cheques, especially those below $30-50 million, may have a different set of pitfalls.

Any company that takes on a small cheque from Tiger Global should work with the assumption that this is the last cheque they’ll receive from the firm. If all goes well, you will have unmatched freedom and have them return for your next round. But if things take a turn for the worse, Tiger will be reluctant to get involved again to help you out.

For people who have been in the market long enough, the small ticket sizes, cash conservation, and strategy changes all feel cyclical. They happened a few years ago and will likely happen again.

So, should we believe that when the good times return, everyone will throw caution to the wind once again?

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Peeyush and Mohit

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