Friday Letter: How to respond to the Tiger phenomenon

Seeing large asset managers crossing over and investing in late-stage rounds is nothing new in venture. But let's see what happens next.

If I had a nickel for every time someone asked me if I had seen the latest venture deal involving Tiger Global Management, well, I wouldn’t have enough to start my own fund. But I’d have a lot of nickels.

Tiger is the topic du jour in 2021. The firm closed a $6.7 billion fund at the beginning of the year but is reportedly already in talks to raise another $10 billion for its largest growth vehicle to date. No doubt, it needs such a large purse to help source its dealmaking, which is more than a deal every two days worldwide.

But it’s a fallacy to say this is a result of the SoftBank effect. Long before SoftBank had about $100 billion to deploy, Tiger had been investing in late-stage venture and raising multi-billion-dollar vehicles every couple of years, or in even less time than that. Yes, truth be told, seeing large asset managers crossing over and investing in late-stage venture rounds is nothing new – as per Tiger, Coatue and others.

But what is new is the blistering pace of deals. Mega-deals are the new normal in venture. And many large asset managers are coming down earlier in the stream. Tiger even led a seed deal this year.

The questions most often asked are “why?” and “why now?”

Clearly, the firms are seeing opportunity in the venture asset class they’re not seeing in the public sector. But Venture Capital Journal posed different questions. For our September issue, we asked “what now?” and “how are traditional venture managers responding?”

The answer we kept hearing was that the industry is relying on its value-add approach.

Tiger, Coatue and others have bucket-loads of money, but they rarely get deeply involved with the entrepreneurs and their start-ups. So far, they have not involved themselves with value-add services, though many late-stage firms do. In baseball, a batter adjusts in-game and responds to pitches up and in. So value-add may soon be as much a part of the latest financing as the mega-deals themselves.

Read our story about the giants dominating the late-stage and let me know what you think. You can hit me up at agoldfisher@buyoutsinsider.com.