The New York-based hedge fund will step up investments in India from its mega $3 billion fund called Tiger Global Private Investment Partners XI, said two people with knowledge of the company’s strategy in the country.
The new fund comes shortly after Tiger Global’s Lee Fixel helped script one of the biggest M&A deals in India’s corporate history as US retail giant Walmart acquired 77% of India’s largest online retailer, Flipkart, for $16 billion.
Tiger Global, which bet $1 billion on Flipkart since 2009, made over $3.3 billion in the transaction and still owns around 5% stake.
“The new fund is expected to close in the next few weeks and India is specifically mentioned as one of the focus areas in the documents,” said one of the persons familiar with the development. The fund will also invest in other geographies including US and China.
A spokeswoman for Tiger Global Management did not immediately reply to an email seeking comment. “Fixel is now looking at only growthstage companies… which have valuations of $200-250 million,” said the managing director of a venture capital firm whose portfolio companies Fixel is scheduled to meet when he visits India later this year.
Likely on Fixel’s radar will be new e-commerce companies, logistics tech startups, business-to-business commerce firms, and digital media/content ventures. That would be in contrast to Tiger Global’s stand when it raised a $2.5 billion fund in November 2015 to not make new investments in India. In a 12-month period beginning in late 2014, Tiger Global had finalised 18 new investments even as it poured more money in Flipkart and taxi-aggregator Ola, lifting India exposure to $2 billion.
Questions over the fate of its investments in Flipkart and Ola forced Tiger Global to re-think its future investments in India, including in portfolio companies. This was also because Fixel came to believe that India’s Internet economy was not growing as rapidly as that of China’s.
“Fixel was spending most of his time on Flipkart during that period (late 2015 to 2017) as half of his capital invested in India was in that company. All his returns were expected to come from it,” said the CEO of a company Tiger Global backed in 2015.
In that period, Tiger Global selectively participated in follow-on investments in some portfolio companies — logistics firm Delhivery, home rental network Nestaway, grocery delivery platform Grofers, and tea retailer Chaayos. It also invested in companies in China, Latin America, the US, and the Middle East from the $2.5 billion fund.
This time, Fixel is expected to focus on mid- to growth-stage investments, unlike his 2014-2015 strategy of making a slew of $5-10 million investments in early-stage companies. Some of those companies, including Zopper, Localoye and Zo Rooms, have shut while others such as Culture Machine, Little and Cube26 have struggled.
Tiger Global is now seeking to lead funding rounds starting from $30 million, said the VC investor quoted earlier.
“Fixel has probably decided that he is not good at doing early cheques and it’s better to find mature and fast-growing companies,” said the head of another early-stage venture capital fund. “The speed at which companies are reaching billion-dollar valuations shows that the market has changed and there is an inflection point.”
Tiger Global’s plan to step up activity in India also comes at a time when venture funding has picked up in the country, although startup formation is not as strong as it was in 2014 and 2015. Investments across series A, B and C surged to $1.6 billion across 165 deals in the first half of 2018 — a 60% jump from the capital pool of $1 billion across 140 deals that flowed into these stages during the first half of 2017, show data from Tracxn.
Some feel that Fixel’s new approach goes back to his strategy when he began investing in India, when Tiger Global backed local classifieds firm Just Dial and online travel agent MakeMyTrip, which have yielded good results. Others feel that while the strategy is changing, Lee’s aggression has not.
“Lee is a big picture guy and a bigger risk-taker. He is always urging his portfolio companies to take more market share, and that view has not changed,” said the cofounder of another company backed by Fixel. “But by 2016, he realised that India will need a lot more capital than Tiger can bring in, which is now playing out with Walmart and Alibaba.”