At Fund Wisdom we look to help assess technology and market opportunities that lower costs for early stage venture investors. With Masayoshi Son’s Softbank creating mega funds like the $100 billion Vision Fund with more to come behind it we are observing a dramatic shift and opportunity. These large institutional funds generally invest in later stage offerings, or companies that have higher certainty in terms of cash flows. We are observing funds like this and Tiger Global Management continue to move to earlier stage offerings deploying capital in high growth early-stage technology firms in search of higher returns.
SoftBank is headquartered in Tokyo, Japan and was founded by Masayoshi Son in 1981, while SoftBank Capital and Investment Advisors are headquartered in London. The Vision Fund was created in 2016. SoftBank started as a multinational telecommunications and technology firm that has become an aggressive early-stage investor in technology companies. It is most well known for its $100 million investment in Alibaba for a 27% stake and $70 million in Yahoo Japan that are valued at a whopping $132 billion and $8 billion respectively at the time of writing this article.
The Vision Fund has invested in Uber ($9.3 billion), ARM Holdings ($8.2 billion), WeWork ($4.4 billion), Flipkart ($2.5 billion), and Paytm ($1.9 billion).
Tiger Global Management is a hedge fund based out of New York that was started by Coleman Chase in 2001. It has Assets under Management (AuM) of $20 billion. Their private funds generally have a longer horizon of 10-years and are focused on high-growth companies in the internet and technology industry. On October 15, 2018, according to the Financial Times, the team raised $3.75 Billion in only 6 weeks. Private Investment Partners XI is the eleventh venture capital fund the group has raised. They state they will focus on consumer internet, cloud and industry-specific software, as well as direct-to-consumer companies in China, India and the US. According to data provider Preqin, it is the highest venture capital fund to close in 2018 at the time of writing this article.
Some of their most famous investments in the technology industry consist of Facebook (personal social network), LinkedIn (professional social network), JD.com (Chinese e-commerce company), Flipkart (Indian e-commerce company), Spotify (online music streaming), SurveyMonkey (global survey company), Square (mobile payment and service aggregator), Glassdoor (online jobs and reviews), and others.
The team was able to achieve a $3 billion from its 20% stake in Flipkart, the Indian e-commerce giant. This resulted from Walmart acquiring a majority stake in Flipkart in May this year for $16 billion. Lee Fixel from Tiger Global is said to have played a major role in that acquisition.
Apart from that, it is also seeing significant returns from its investment in Glassdoor and Spotify. Glassdoor is set to be acquired by a Japanese HR company, Recruit Holdings for $1.2 billion and Tiger Global invested $50 million for Series E funding in the company in 2013.
Further, after Spotify’s public listing in April this year, Tiger Global is set to reap a big payout as one of its biggest shareholders. Going by the first-day trading price of the company, the 7.2 percent stake of Tiger Global would be valued at $1.9 billion.
Recently, it has invested $17 million in Series A funding at Green Bits, a California-based point-of-sale software company for cannabis retailers, $18 million in Series C funding at ChargeBee, a California-based subscription management SaaS startup, and $51 million in Series D funding at Nestaway, an Indian home rental startup.
Primarily fund managers of this size in assets under management focus on public and later stage companies with consistent cash flows that are less risky and offer a higher return on investment. We are seeing a shift of larger pools of capital in search of returns in high growth firms as compared to public companies with limited growth opportunities.
As more fund managers like Tiger Global and Softbank are investing in high-growth, early stage, technology firms to chase the higher returns we will continue to see changes in the market. Tiger Global focuses on a 10-year investment horizon and thus has sufficient time with its LPs to reap the benefits of these investments. Softbank is flooded with capital from its phenomenal bets in Alibaba and Yahoo Japan and wants to make the most of that capital. So far the strategies have worked but how long will it last?