Tiger, Tiger taking flight


“If Lee likes a company or a founder, he is ready to pay a premium to seal the deal”, says the founder of a Tiger-backed startup who spoke to The Ken on condition of anonymity. “Lee has no qualms in offering an accelerated valuation in such circumstances”.

An accelerated valuation essentially represents paying a price pegged to a multiple of a forward-looking metric. For instance, it could mean a valuation equal to 10X of next year’s top line. While it might sound like this translates to overpaying, in Fixel’s view it doesn’t.

There are two reasons why this makes ample sense. Firstly, for Fixel, it crowds out the competition as very few competing VCs would be willing to pay such a price. Secondly, it shows the founder that Tiger is in her company for the long haul, rather than optimizing for the short run and looking for an exit in the next year or two—Fixel wants the company to go big and this premium is a signal that he will be there for the long term.

Double-Edged Sword

Of course, this is a double-edged sword in that if the company does not “grow” into this forward-looking valuation, it becomes difficult for it to raise the next round. Most Tiger-backed founders that The Ken spoke to are cognizant of this risk and said that they entered this pact with their eyes open.

Second, let’s consider the volume.

Prior to Tiger, any GP of any VC firm in India rarely took on more than five to six companies individually. Each company would ostensibly then get a high-touch treatment with dedicated focus and time allocations.

Fixel eschewed this limitation by adopting a low-touch approach when it came to table stakes such as reporting and board meetings. He rarely joined the Board of Directors of his portfolio companies and offloaded reporting to others in his team. Given that Tiger makes both public and private investments, it has a large in-house team for tracking portfolio performance and generating reports.

“Tiger has a team in Singapore that helps us generate monthly business scorecards. The format of these reports and the information they present is the result of years of experience in public markets and provide a succinct summary of our business vitals”, says the founder of another startup backed by Tiger.

He requested not to be named. Fixel limits his time to view the executive summary of these business scorecards and intervenes only when he feels that something needs to be explained. This hands-off approach enables Fixel to provision time to helping his portfolio companies in high-leverage items, specifically in terms of connecting founders to potential customers, partners, and follow-on investors.

Now, let’s look at the aspect of velocity. Does Tiger’s quick decision-making style represent a lazy, gut-driven approach to investing?

It is undoubtedly true that once he has engaged with a founder, usually over a Skype call according to sources, Fixel decides very quickly on whether he wants to invest.

Analyzing the various aspects

But what is not commonly known is that prior to taking that meeting, Fixel and his team have spent hours looking at various aspects of the company in great detail. By the time the actual interaction takes place, Fixel usually has an informed opinion on the founder and the company and a data-driven thesis on whether the investment makes sense.

The call itself typically helps Fixel get a sense of whether the founder as a person is someone worth backing and once Fixel determines that, he moves quickly with an offer. When it comes to offers, Fixel has an interesting approach. As mentioned earlier, he comes up with a number that he feels is fair and representing an accelerated valuation and usually, the offer operates under the take-it-or-leave-it dictum with little room for bargaining.

A Mumbai-based entrepreneur learned this the hard way. Fixel had offered him a generous $30m pre-money valuation for a $10m investment into his early-stage company. The entrepreneur figured that he could play him for more as he thought that first offers always offer room for bargaining. He asked for a valuation of $35m.




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