Playing Different Games

Jan 19, 2023 8:01 PM

The Tiger Phenomenon

Somewhere, right now, in Silicon Valley…

“So how about these Tiger guys eh?”

“Hah! You’re telling me — I heard they did [Deal X] in 24 hours after only getting a P&L for diligence and came in 25% over the founder’s asking price!”

“I heard they’re doing a new deal every 2 days! It’s completely crazy”

“Totally — good thing we’re sticking to our knitting, these hedge funds are insane”1

If you actively invest in private, high-growth technology businesses, there’s a good chance you’ve had a conversation that looks something like the above in the last 12 months. Or if you haven’t, you’ve almost certainly seen an investor on VC Twitter lamenting the state of the startup fundraising environment or joking about hedge funds’ activity in venture, myself included!

February 23rd 2021


The hedge fund most often in the crosshairs is Tiger Global — a tech-focused “crossover" that has dominated media headlines & VC gossip circles for the last 12 months due to its record-breaking deal pace & aggressive style. From an outsider’s perspective, Tiger’s investment strategy can be roughly summed up as:

  • Be (very) aggressive in pre-empting good tech businesses
  • Move (very) quickly through diligence & term sheet issuance
  • Pay (very) high prices relative to historical norms and/or competitors
  • Take a (very) lightweight approach to company involvement post-investment
  • Above all, deploy capital, deploy capital, deploy capital

And Tiger isn’t the only fund employing this type of strategy. Addition (led by ex-Tiger Global Partner Lee Fixel), Coatue (a “Tiger Cub”, just like Tiger Global), and several others exhibit these tactics to varying degrees2, and have elicited similar amounts of frustration from more “traditional” VCs.

Ask 10 VCs for their thoughts on Tiger et al and most of them will react with a mix of dismissiveness and disgust. They’ll say that crossovers are drastically overpricing rounds, not doing enough diligence on their investments, or are in some other way breaking the spoken & unspoken “rules” of venture. So what gives? Are Tiger & this new class of crossovers collectively dumb and/or drunk off of the spoils of a decade+ long tech bull market?

Not at all. On the contrary, we are seeing the emergence of a new velocity-focused strategy in the venture/growth3 asset class that will fundamentally change the way that venture capital is raised. By breaking many long-held but outdated rules & norms of venture/growth investing, Tiger has developed a flywheel that enables them to offer a better/faster/cheaper product to founders while generating more $ gains than their competitors. Tiger is eating VC, and with the right context, I think it’s clear why4.

Playing Different Games

There’s an amazing scene in Game of Thrones’ first season where a mercenary named Bronn fights a knight named Ser Vardis in a “trial by combat”. Bronn fights to save one of the show’s troubled protagonists Tyrion Lannister from a death sentence, and more importantly collect a nice payday from Tyrion if he succeeds in saving his life.

Bronn tosses Ser Vardis Egen out the Moon Door


Stakeholders in the venture/growth game


Tiger’s main flywheel


What, you thought you were going to get through a post by a VC without a flywheel included??