India’s unicorn spree and the incredible roar of Tiger Global

From the eye of the Tiger to the roar of the Tiger, the recent investment pugmarks of Tiger Global has made startups into unicorns at a pace never seen before in the Indian startup ecosystem. 

The New York-based hedge fund helped make six unicorns in India in the past 100 days. And three just this week when it led rounds in Groww, ShareChat and Gupshup. The investment firm also participated in CRED’s new round, which valued the two-and-a-half-year-old company at about $2.2 billion.

Significantly, Tiger led rounds in ShareChat, Groww and Gupshup at over 3X premium of their valuation as compared to their previous rounds. SaaS company Innovaccer and construction marketplace Infra.Market also raised capital from Tiger in 2021 at over $1 billion valuation.

While media reports and observers see Tiger’s aggressive investment thesis in 2021 as an unusual phenomenon, other venture capital firms and entrepreneurs who have tracked the hedge fund closely in the past decade say it’s nothing new. 

“Tiger does this every 2-3 years. Makes a lot of bets and then goes silent and sees what blooms out of these and then backs them more,” said one of the VCs requesting anonymity. “And, the others tend to suffer because no one wants to follow Tiger into a company.”

The analogy of this person could also be backed by Tiger’s past history. In 2015, it had invested in 18 companies and then went into hibernation mode for the next three years. 

To understand more about Tiger’s investment thesis, let’s take a look at a few of its past investments. In 2010-11, it invested in Flipkart and Letsbuy but later refused to put more money in the latter and forced it to consolidate with Flipkart. 

Similar stories repeated with Zo Rooms, Localoye, Roposo and lately Upstox and Wow! Momo where Tiger was an early investor. It chose not to back them in the follow-on rounds but kept backing Flipkart and Ola.

According to another growth stage VC, Tiger’s increased interest is a boon for the ecosystem. “Without them, India won’t have Flipkart and this VC ecosystem,” the person said who also wished not to be named. 

Large rounds by Tiger would offer lucrative exits to angels, early-stage VCs and other stakeholders. “A large amount of this money would eventually come back to the ecosystem,” the VC said. 

“Each year, emerging businesses create $70-80 billion worth of liquidity in the US. Comparatively, India is at $9-10 billion at the moment and this figure would reach $30 billion in the next few years. This will put the economy on a superhighway,” the VC said.

While the early backers in companies where Tiger led rounds would definitely make a killing, Sequoia Capital in particular has been able to co-opt Tiger in investing into its portfolio companies more than any other VCs in the past year. 

According to Entrackr data, over half a dozen companies backed by Sequoia including Groww, Unacademy, Byju’s, SirionLabs, Innovaccer and KredX have gone on to raise new rounds led by Tiger since January 2020.

Tiger is also a co-investor in InterviewBit, Urbanpiper, Moglix, Clevertap, InVideo and Razorpay.

Importantly, reports suggest that Tiger is also in talks to lead new rounds in three of Sequoia’s portfolio companies - Pristyn Care, Plum Insurance,  ClearTax and Kutumb.

Looking at these bets by Tiger, a second term Sequoia-backed entrepreneur said requesting anonymity - “Sequoia seems to be a scout for Tiger”. 

India is not the only market where Tiger Global has been making big bets. It has led or co-led several unicorn-making rounds in global tech companies during the past three months. 

These include leading a $170 million unicorn round in African payments company Flutterwave, co-leading a $300 million Series C round in AI-based fintech firm HighRadius tripling its valuation to $3.1 billion and also joining 6sense’s $125 million Series D at a valuation of $2.1 billion. 

A recurring phenomenon in all such investments is that Tiger Global has led a huge investment round in these late-stage startups, multiplying their valuations. 

Tiger Global has been a storied investor in the Indian startup ecosystem for a decade. The twenty-year-old fund changed the grammar of startup investing in India by backing Flipkart in its early years, and then Ola. 

While the firm has scored blockbuster returns with its two early investments, the current investing spree and in turn its Midas touch has become quite an exciting scorecard for watchers to track and see who will be the next unicorn in India.