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💸 "The Tiger Global Memo"

The Twenty Minute VC

Photo by Giorgio Trovato / Unsplash

Host: Harry Stebbings
Guest: Doug Leone | Global Managing Partner | Sequoia Capital,
Bill Gurley | General Partner | Benchmark Capital,
Michael Eisenberg | Equal Partner | Aleph,
Anton Levy | Co-President | General Atlantic &
Kareem Zaki | General Partner | Thrive Capital
Category: 💸 Venture Capital

Podcast’s Essential Bites:

[3:29] DL: “There's all these attempts to short circuit what we do. What we do is company building. We'd like to get there early, we'd like to be the first investor when there's one employee […] and help set the DNA and then stay with these companies for the next 15 years, maybe 20 years. […] We'd like to say we want to go from seed to IPO and beyond. […] You cannot do what we do if you're investing in five deals a week. There's no way to do that.

[5:03] BG: “There appears to be a rather competitive environment going on between the different top players in the late stage private round, provoked mostly by Tiger, […] who's taking a very bold [approach]. Some people have called it Softbank 2.0. […] There's ample money available. And they're raising rounds faster and faster. It's easy to become valuation agnostic to a certain extent, because you've seen if you hit a winner, if you hit a snowflake, if you hit Uber or whatever, it ends up being 100x or more than where you are today, so you become indifferent. So you have ample supply of money, you're not as worried about the daily mark. And every one of these things is a lottery ticket from your standpoint and the way your economics work. And so I think that shift where the late stage money move from a traditional kind of evergreen 2 and 20 model to our 1 and 20 […] to a venture structure, I think has implications for what's happening.”

[6:51] ME: “I talk often about the weaponization of capital. What we often don't pay attention to is if you got the largest war chest at the table, you've got a shot to overwhelm the cap table in a down market. Meaning if I'm Tiger, and taking a large round from Tiger at a company, then the company needs capital at some point, they are kind of the winner in the capital sweepstakes in that case, because they just have less price sensitivity and ability to overwhelm the cap table. And I think that's pretty meaningful.”

[9:20] AL: “I think that the passive capital commoditizes really fast. If you're looking for passive capital, and you're saying give me money at the highest price, and leave me alone, […] at that point […] what really matters to you is just price. […] I think I would be worried if I was in that business. […] I think the Tiger guys are really smart and they've done a great job. But how can they differ? So they say, […] we're really easy to work with, we're really fast, […] we can give you a term sheet on our first call [at] a really aggressive price. And they're smart, because they're saying that's what their customer wants. But I think those things are easier to copy if people can move fast enough and raise the capital and get the flywheel going. I think it's harder to copy, hey, I'm really going to change outcomes for you. […] I'm not just going to give you capital, like everyone else, I'm going to create the difference between maybe a 10x opportunity and 20x opportunity.”

[15:52] KZ: “I think another reason people are complaining is that what Tiger is doing is maybe making them feel insignificant. Tiger clearly has massive ambitions and investors who are seemingly a big part of this tech ecosystem are looking a little smaller now. And I think it's forcing them to wonder […] where do they fit and this whole thing? And if you haven't wrestled with that question before, it's a hard one. So it's natural that it makes you uncomfortable, and you push back on the things that make you uncomfortable. So the fact that the game is changing, the way investing is changing is totally inevitable, and just a factor of competition and the industry becoming attractive.”

Rating: 🚀🚀🚀🚀

🎙️ Full Episode: Apple | Spotify | Google
🕰️ 20 min | 🗓️ 02/23/2022
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