Happy New Year! We're kicking off the new year by learning from Tiger Global Management's ups and downs as it relates to fund management!
Listen to Lincoln's full analysis of Tiger on his podcast, "Funds that Won."
Meet Tiger
Tiger Management was founded in 1980 by Julian Robertson. It was one of the earliest and most successful hedge funds.
Julian started with $8 million and followed a global macro long/short strategy.
The fund started off as a success, but approaching the 2000s, some things started to fall apart; he made some bad investments and misallocated his money.
Due to this, Julain decided he was done, and Tiger Management closed its doors in 2000.
However, Chase Coleman approached Julian and asked him if he could take the firm and try and continue it using investment strategies more focused on technology.
Julian liked the idea and gave Chase $25 million to go and start Tiger Global Management.
To Julian's credit, he ran a successful fund for 20 years and then staked out 38 different investment funds!
But Tiger Global Management was the most successful of all!
Coleman's Comeback
Coleman soon realized that all the money to be made in tech was not in the public markets and hedge funds, the alpha was in small, private companies.
So, only 18 months after Tiger Global's start, he launched a tech venture capital fund.
Coleman made some great investments in successful tech companies like Facebook and LinkedIn.
They've had their ups and downs, but one of his biggest hiccups was earlier this year in April 2023.
Most private markets dried up in 2023 and valuations plummeted.
Leading up to that time frame, Tiger was overly optimistic about their investments or in other words, were overvaluing the companies they were invested in.
When 2023 came around, they realized that they had invested in overly high valuations.
So, they had to go notify all of their LPs that their initial investments were now worth a lot less.
Consequently, they were heavily scrutinized for their poor performance and decided to decrease the volume of capital raised for their next fund.
Sometimes Smaller is Better
I've said before that it's a lot easier to generate a return on a small investment than a larger one; it's easier to double $1 than it is $10.
Tiger's venture fund was $12.7 billion - which is great, it's so hard to effectively allocate that much money.
If your startup company received 2 different offers...
- $1 million for 10% of your company
- $2 million for 10% of your company
...then at first glance, you'd take the second offer because you're getting double the money.
However, remember that your company will need to live up to your expected performance; a $20 million company will be expected to perform twice as well as a $10 million company.
Maybe you're not ready for a valuation that high! Don't grow too fast or you might fall.
Underdelivering instead of overdelivering will make you lose investors, money, and your reputation... so be wise!
Conclusion
I hope you're learning from Tiger Global Management's rises and falls and how it applies to you as a current or future fund manager!
Continue listening to Lincoln's full analysis on his podcast, "Funds that Won."
If you're ready to start your own fund and need some direction, visit Fund Launch!
Thanks for stopping by,
Bridger Pennington
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the author
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