Redefining the way VCs invest in India

New York-based hedge fund, which invests in start-ups from a separate venture capital fund, was among the first to spot the consumer Internet opportunity in India

New Delhi: Tiger Global Management can be credited with bankrolling the e-commerce sector in India. The New York-based investment firm, which invests in start-ups from a venture capital fund, was among the first to spot the consumer Internet opportunity in India. Its aggressive deal-making style has redefined the way venture capitalists have invested in the country in the last few years.

Though Tiger Global has been on the prowl in India since early 2005, it spotted Flipkart, often dubbed India’s Amazon, in 2010 and invested close to $10 million in a Series A round. Today, Flipkart, Indian e-commerce’s poster child, is valued at about $15 billion. Tiger alone has pumped in more than $1 billion over the last five years. Since then the firm invested in a host of start-ups, including fashion etailer Myntra (now part of Flipkart), social commerce portal Limeroad, hyperlocal commerce business Grofers, e-commerce logistics provider Delhivery and, e-commerce marketplace Shopclues.

Tiger Global did not participate for this story.

Globally, the firm is largely known as a technology-focused hedge fund. Its origins go back to 1980 when Julian Robertson founded one of the earliest hedge funds. The fund closed down in 2000, according to a CNN Money report. In 2001, Chase Coleman started Tiger Technology Management with the money that Robertson had offered him.

“Tiger Tech had always been a global fund, but at some point in 2003, Coleman understood that being a global fund was more of a defining part of his fund’s identity than being a technology fund. He was smitten by the globalization wave and renamed the firm from Tiger Technology Management to Tiger Global Management to better reflect its activities," Kashyap Deorah writes in his book The Golden Tap: The Inside Story of Hyper Funded Indian Startups.

It was only after successful exits from technology start-ups in the US and China that Tiger started looking at India, starting off with investments in dot-com era start-ups such as MakeMyTrip Ltd and Just Dial Ltd.

The MakeMyTrip investment happened in 2007 and Tiger was part of the public listing process for both firms. Tiger’s venture capital investments in India are spearheaded by 35-year-old Lee Fixel, who had earned hefty returns for the firm in China by betting on China’s Internet economy early on. Fixel expects India to be the next China. Starting from Flipkart, he’s pumped money into over 35 start-ups here over the last 10 years. Those who have worked with Fixel believe he is an Indian in the skin of a Jewish-American. He is known to pick his portfolio companies by scanning the ideas, the size of the market alone and, most importantly, is the entrepreneur running the show. He is based in New York but is known to fly into the country every two months to meet portfolio companies. When evaluating entrepreneurs, he has a checklist. If an entrepreneur has scored high marks in the IIT (Indian Institute of Technology) entrance examination, for instance, it counts. So does the entrepreneur’s age. Fixel also prefers first-time entrepreneurs over the second generation founders and has largely bet on entrepreneurs in their mid-to-late twenties.

More importantly, Fixel is known to move swiftly on deals which gives Tiger an edge over other venture capital firms in the country. These could be new investment deals, follow-on deals or consolidation plays. The firm has helped orchestrate two significant consolidation deals among its portfolio companies: the sale of electronics etailer Letsbuy to Flipkart in 2013 and the $330 million-plus buyout of Myntra by Flipkart in May 2014. The two deals helped Flipkart increase its market leadership, which eventually led to the company touching a $15 billion valuation in its last funding round in August.

In follow-on deals, Tiger is known for doing large follow-on rounds at high valuations to make sure that its portfolio companies wipe out the competition.

Today, Tiger’s investment horizon has expanded and the fund is going beyond the plain vanilla e-commerce firms. It recently picked up a small stake in Chaayos, a tea café chain and, Ather Energy, an automobile company. It has also recently become more active in earlier stage deals, often investing at the seed stage.

As the investment frenzy tapers down in the country, Tiger Global, too, seems to be slowing its pace of investments, especially in early-stage companies. According to industry experts, though Tiger will continue to participate in follow-on rounds in its existing portfolio, it has decided to diverge from its aggressive investment style by making lesser new investments.

These are parts of a multi-part series on 10 years of venture capitalists investing in India. Over the next few days, Mint will profile some of the most active venture capital firms in the country.

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