Friday Letter: What it means when you see a Tiger in an early round

With Tiger Global making dozens and dozens of bets so far this year, including the seed round for Blair, early-stage investors are wondering how will this impact them and their portfolios.

I’ve been covering venture long enough to not get too phased when people tell me of trends they call alarming.

So, I haven’t overreacted as people have said to me that Tiger Global and Coatue Management and other growth equity investors and PE firms are making more venture-style bets and coming earlier in rounds. Their point being that Venture Capital Journal needs to cover this and find out how it’s impacting entrepreneurs and early-stage GPs.

One seed investor told me it’s foolish for entrepreneurs to take money from any late-stage investor in a Series A or earlier round. Part of the concern, the investors said, is that the larger firms making oversized early bets are not taking board seats. Nor will they roll up their sleeves and provide market strategy and other guidance to the young company.

But who can blame Tiger and others for wanting to get in on a hot start-up before the company’s value spikes?

And we’ve seen this play out before in the past two decades. Hedge funds and other PE firms are active in venture, including an early round or two. That is nothing new. And Tiger has reportedly already surpassed 100 investments this year.

Then in early May, San Francisco-based Blair, which provides a platform for schools to finance students, raised a seed-stage financing of $6.3 million, with Tiger Global leading. Tiger Global normally doesn’t enter a seed deal.

Meanwhile, Crunchbase reported in April that PE firms investing in VC-backed companies is on the rise. Late-stage funding grew the most in the first quarter of 2021, at 56 percent quarter-on-quarter and more than doubled at 122 percent year-on-year, Crunchbase reported.

So, now I am mulling over what it means that Tiger Global led a large seed round. It could be a one-off situation. But for future start-up entrepreneurs, the big bucks of a Tiger or a Coatue and others are certainly going to be hard to resist at the seed stage.

Let me know what you think. You can drop me a line at agoldfisher@buyoutsinsider.com.