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Good morning 👋
What a week.
David Sacks has a new gig in the White House
a16z shared where they’re investing going into 2025
Nik Milanović (GP @ The Fintech Fund) shared how he’s thinking about the fintech landscape
We put out a full market map of the companies that are recreating the modern investment firm\
Lots of typing.
Let’s get into today’s piece.
Today’s highlights
An update on Tiger Global’s returns
Naval’s mental models
The modern investment firm market map
The startups working to lowering your taxes
TOP
Revisiting the Tiger strategy (again) 🐯
CalSTRS released some more data on it’s LP position in Tiger Global’s $12.7b PIP 15 fund, and the results are … not great.
15% paper markdown
Huge losses on Superhuman (marked down by 45%), DuckDuckGo (marked down by 72%), OpenSea (marked down by 94%)
Bottom 10% of funds in the 2021 vintage
Tiger raised and deployed this fund at the height of the venture hype cycle, and they are still paying the price. Aside from the markdowns and losses, the reputational risk has turned away LPs and senior talent, the firm’s next fund was only $2.2b (a $10.5b reduction from PIP 15 fund).
How did it get this bad?
That’s probably a longer piece, but here are the quick notes.
Aggressively pre-empt good tech businesses (they invested in 315 businesses in 2021 alone according to Pitchbook)
Move ridiculously fast through diligence (sometimes offering term sheets within 48 hours) by outsourcing diligence to Bain consultants
Ignore price sensitivity and pay more than other funds are willing to
Move to the next deal and take a lightweight approach to company involvement post-investment
So what are the takeaways?
Higher velocity = higher exposure. Most investors will admit that they like going fast (Who doesn’t like getting deals done?). But you sacrifice a lot in order to make quick investment decisions, and Tiger is paying the price for those quick decisions today. Higher velocity is a multiplier when it’s the right strategy, but it also works the other way when things go South.
Lowering price sensitivity standards becomes a downward spiral. Speaking from an LPs perspective today, if you don’t have a portfolio strategy with ownership targets, you aren’t investible. Especially now that valuation multiples have returned to normal, it has become almost statistically impossible to beat the market without strict ownership targets.
No involvement post-investment. I actually don’t have a problem with this approach. Most VCs can’t help companies beyond giving them money (despite desperately trying to). Tiger was upfront that companies should only look at them as a source of capital, but their lack of involvement post-check created little-to-no opportunities for follow-on investments to double down on their winners.
Top talent will leave if fund reputation / returns creates career risk. Especially in venture, brand is created through your association with winners. The other side of that coin is that brand is also created through your exposure to losers.
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LINKS
🧠 Naval’s Mental Models and Essential Interviews: Guillermo Flor continues sharing the deep dive into the mind of Naval Ravikant
🎬 Getting Started: Pillar VC’s Founder Playlist shares advice around building a startup
🤝 The Founder Guide to Negotiating Venture Deals: The do’s and don’ts when negotiating pre-seed, seed and series A terms
🎯 Identifying Your Bullseye Customer in One Day: Michael Margolis, UX research partner at Google Ventures for 15 years, discusses how startups can identify the specific subset of their target market
🤨 Is Software Cheap or Expensive?: Clouded Judgement provides the charts on the latest trends in cloud software companies
TWEET
HEADLINES
More Startups Are Working On Lowering Your Taxes (Crunchbase)
9 VC firms collected half of all money raised by US funds in 2024 (Pitchbook)
GP-led secondaries to end 2024 with new record (Pitchbook)
Stablecoin Startups Seek Fresh Cash Amidst Crypto Payments Frenzy (The Information)
Humba Ventures raises $40M fund to invest in deep tech, defense tech (TechCrunch)
MEME
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Thanks for reading this far and giving us a little bit of your attention this week.
Feel free to unsubscribe whenever this stops becoming valuable to you.
- Clay
RESULTS
Here are the results from our poll question in Wednesday’s piece:
Which of the a16z themes are you most-bullish on investing in over the next 2-3 years?
🟨⬜️⬜️⬜️⬜️⬜️ American Dynamism (1)
🟩🟩🟩🟩🟩🟩 Bio + Health (5)
🟨⬜️⬜️⬜️⬜️⬜️ Consumer (1)
🟨🟨🟨⬜️⬜️⬜️ Crypto (3)
🟨⬜️⬜️⬜️⬜️⬜️ Enterprise + Fintech (1)
🟨⬜️⬜️⬜️⬜️⬜️ Games (1)
🟨🟨🟨⬜️⬜️⬜️ Growth-Stage Tech (3)
🟨🟨⬜️⬜️⬜️⬜️ Infrastructure (2)
