The Indian startup ecosystem has an unspoken rule - If you are riding a Tiger, why would you stop? And the year 2021 has been testament to this.
While 2019 may have marked the return of American hedge fund 'Tiger Global' to the Indian startup ecosystem after a three-year lull, 2021, and even the first month of 2022, has seen significant investments from the New York-based firm.
From 2015 to as recent as February 2022, Tiger Global has made 136 deals in the Indian startup ecosystem amounting to $12.37 billion. The period also saw the firm’s big exit from Flipkart, after Walmart acquired the Indian ecommerce major in 2018. Despite that, 2021 has been a significantly stellar year for Tiger Global, with deals across all sizes.
A quick glance reveals - in 2015, it made 35 deals amounting to $2.19 billion, 2016 was four deals amounting to $215 million, 2017 also saw four deals amounting to $157 million, 2018 was five deals amounting to $149 million, and in 2019, the number of deals shot up to 22, amounting to $919.09 million. While this dipped to 13 deals in 2020, the cumulative investment was still a staggering $1.31 billion.
Last year, the company pumped in $7 billion across 47 deals, significantly higher than what it had made in 2015. That amounted to 34 percent of the overall number of deals and 56.64 percent of the deal volumes that the 20-year-old firm has made in Indian startups since 2015. And the momentum only seems to be continuing.
The significance
What does it mean to have Tiger Global as an investor? A startup founder, on condition of anonymity, speaks of his interaction with the the hedge fund's team -
“They are different from any other investor we have interacted with. They bring in fundamental understanding of certain industries and underlying market opportunities. They’re betting on the market first, and only then on the company or the founder. They do a lot of research before even talking to the company. For example, when we meet any investor, we usually spend some time explaining the market, but when we met Tiger, the partner simply skipped the market slide. There was no need to convince the fund on the market opportunity.”
Clearly, if the past few years were anything to go by, the hedge fund’s belief in what the Indian market has to offer today has been steadfast.
Of the 46 unicorns created in 2021, Tiger Global has invested in 16, including ShareChat, Moglix, Innovacer, Infra.Market, Groww, ChargeBee, GupShup, Urban Company, BharatPe, Apna, CoinSwitch Kuber, NoBroker, Spinny, UpStox, Slice, and Pristyn Care. And a month on in 2022, the fund has already pumped in $413 million across six deals.
Quick bets after significant research
Another founder on the condition of anonymity adds,
“Tiger has three partners, and our meeting was with one who has significantly high energy. He met us to understand our vision. It was a 30-minute long meeting which went on for an hour and within that hour, the decision to invest was made. For us, it was a pleasant surprise that the decision was made so quickly. We double checked to even figure out if they are giving the money. He said - if I say we are in, we are in.”
According to another founder with experience working with the firm, Tiger Global does significant research even on the competition. “Having done deep due diligence, they already know the top companies and the fastest growing companies in the sector. This is done before they even make that first call to you. They had spoken to multiple customers of ours and already knew that they were making a bet on the company.”
What this does is make sure that the bet is fast and the first call is just a sanity check on founders.
“From a founder perspective, the time spent simply drops. The data is already gathered in every way possible. They move at speed. They take strong and informed bets,” adds another founder.
Founders unanimously agree that with Tiger Global as an investor, it ensures a stronger focus on the ecosystem, with significantly longer-term view and bet, and perhaps even follow on rounds.
“They have a significantly hands-off approach until you do well. They give you the independence to build the scale. They enter at stages,” adds another founder.
Riding the Tiger
“If you take the sectors Tiger has invested in, it is the story of India today. For example, due to the pandemic, sectors like edtech, jobtech, and fintech are now on a roll. These are mostly direct-to-consumer (D2C) players offering services. These are large, pan-India plays that can go outside India,” opines Sanjay Anandaram, investor and startup mentor.
These startups, Anandaram explains, are targeting a large market and enjoy a set of enabling conditions today in India that makes it easier for them to grow and scale globally.
Tiger Global has also added significant dry powder, which gives it the power to sign multiple cheques. According to an SEC filing by Tiger Global in April this year, the fund that was looking to raise $3.75 billion for its XIV (13th Fund) raised twice the amount at $6.65 billion.
It doesn’t stop here. The hedge fund closed its Fund 12 with $3.75 billion in capital commitments.
“Historically, we have seen that when Tiger invests in a startup in a particular space, other startups find it hard to raise capital. There is a belief that the winner is picked, and others don’t want to pump in more money,” says one investor who spoke on condition of anonymity.
In an earlier conversation with YourStory, Sanjay Mehta, Founder and Partner, 100X.VC, had said, “It is great for the startup ecosystem, with growth capital (from investors like Tiger) flowing in, as the founders can scale their business rapidly. The valuations look glamorous in the media, but underneath they are structured investments with exclusive rights for downside protection.”
And yet, analysts and investors believe there are risks associated with Tiger Global’s aggressive investments into the Indian startup ecosystem. Others believe follow-ons may be “a big question” if they keep investing at the current pace. And yet others believe that a sudden Tiger Global exit from the market can also hurt overall sentiments.
Nevertheless, an analysis of Tiger Global's investment activity into the domestic startup ecosystem so far this year suggests it is more bullish than ever on Indian startups. And that, in fact, 2022, may be yet another year when the company maintains its aggressive pace of investing in Indian startups.
Edited by Anju Narayanan