Lincoln: All right. Today, we're going to be talking about Tiger Management and Tiger Global Management. Different firms, different funds, but they've got some crossover, both of which have managed tens of billions of dollars, although different investment strategies. I think you guys are really going to like today's conversation. Welcome to Funds That One, where we dive into some of the world's most renowned investment funds. We'll interview investment managers across the alternative landscape and learn how they built their million and even billion-dollar asset management empires. We'll explore teams, structures, strategies, and best practices in launching and running alternative investment funds. Tiger Management, not Tiger global management, Tiger management was founded in 1980 by Julian Robertson. Uh, and it was, uh, honestly probably one of the most, uh, the earliest and most successful hedge funds. I started it with 8 million bucks and he went out and he started, uh, you know, it's kind of a global macro long, uh, short strategy. So, you know, he was just really known as being a really good stock picker. Uh, so we started that firm in 1980, you know, grew it very successfully over the next, uh, you know, two decades. And as he approached the year 2000, uh, things started to fall apart for that fund. He started making some bad investments, uh, misallocated. It was honestly right about that time that was. you know, uh, through the emergence of the internet and the.com bubble. And, you know, he kind of made some mistakes and they said, Hey, look where he kind of said he's done. So tiger management closed its doors in, uh, 2000. However, chase Coleman, the third, uh, was a prominent analyst and associate there. Uh, and Julian Robertson just had a lot of faith in this guy and a lot of confidence in his ability to go out and continue investing in technology companies. Chase approached Julian and said, hey, I want to go continue kind of the Tiger legacy. I want to start Tiger Global Management. I want to shift up the thesis a little bit, not as much consumer focused or general stock picking, but I want to focus on this kind of whole tech wave. And I want to start Tiger Global Management and going out and capitalizing on, you know, this this revolutionary technology thing called the Internet. Julian actually staked Coleman. He gave him a twenty five, a meager twenty five million dollars to go out and start Tiger Global Management, you know, to start trading on. And, you know, To Julian's credit, he actually gained a lot of legacy from this because, I mean, he ran a successful hedge fund for two decades and he went on to stake about 38 different funds over the next decade, right? And so a lot of, you know, all these offshoots, all these different funds started out of Tiger when it dissolved. And so, you know, sometimes people will call them like the Tiger Cubs or, you know, a Tiger Cub fund. meaning that it's a, hey, it's kind of a successor of Julian Robertson. But one of his most successful was Chase Coleman when he went out and started Tiger Global Management in 2001. And again, Chase was just like, hey, look, I want to capitalize on tech. And so he opened up this hedge fund, an equities fund, that was going to go trade the public markets and invest in tech companies. And Chase quickly realized that all the best investments weren't on the public markets. They weren't already being traded on the NASDAQ or the S&P 500. But he realized that there's more alpha by getting in earlier. And so Chase, just two years, or I think even shorter than that, like 18 months after starting Tiger Global Management as a hedge fund, he went on to launch a subsequent venture fund, Venture Strategies. Hey guys, thanks for listening. As you know, we don't run ads on this channel, so if you could really help me out, if this podcast has added any value to you or your business, please subscribe, rate, and review. I would appreciate that greatly. Thank you. So I say this all the time where, you know, when you want to go start a fund, you could start multiple strategies, right? But it's typically in your best interest to start with one thing, scale that investment strategy, establish yourself as an expert, which Chase was doing. And then rather quickly, right, within 18 months, he went on to launch a venture fund and he launched, he introduced this new product to get into these kind of tech and, uh, teleconference, you know, businesses earlier. And, you know, he made some amazing investments, right? He, he went on to, uh, you know, allocate in Facebook, pre IPO LinkedIn stripe. Like he's, he's, he has a lot of these banner assets in his portfolios and they did really well for, uh, you know, the first little while. Um, well, okay. First little while, I mean like first 15 years. I mean, sure, they had their hiccups, they had ups and downs. Even at one point, they invested in a group that, you know, was accused of insider trading. So one of his larger missteps actually just recently happened in 2023. So what happened in April, for those of them been tracking the environment, is there was a change in multiples. It was kind of this multiple compression, right? The markets were booming. in late teens, early 20s, and the private equity markets and VC markets really dried up in early 2023. And what happened is valuations just plummeted in the private markets. Um, you know, they weren't trading as, uh, as high of multiples. Okay. So there's something that happens, uh, in venture when, um, like let's go to shark tank here. Uh, you know, if you like the, these sharks will, they'll say, Hey, I want, I'll write you a hundred K check. in exchange for 10% of your company, right? If 10% of the company is worth $100,000, then there's now an enterprise value, like a valuation on that company for a million dollars, right? Because 100% would be a million. If 10's worth 100K, 100% is worth a million. You got that? So every time a company takes on financing, an early stage company, either through a series A, a series B, Even debt for that matter. It's given an appropriated valuation So and this happens at a small scale like on Shark Tank and it also happens with the bigger firms, right? We look at like the WeWork debacle, right like they received some financing. Let's call it I don't know exactly the terms but let's say Ballpark, they took on some money, a 10% stake in their firm, and they took on a $4.8 billion check. That would value the company at $48 billion, and that's what happened. That valuation is based on the fact that hey, this company is going to go achieve these revenue targets or it's going to have this growth rate. And it's typically like a it's a future like future value of the company today. And so what happens when those companies don't meet those targets or something goes wrong and they need additional financing? Well, the value of those investments go down, right? Just as they would in like a typical stock can go down, right? The valuation of a private investment goes down. So if a fund had invested, let's say $4.8 billion for 10% of the company at a $48 billion valuation, and then all of a sudden, you know, WeWork's performance is half of what it was, That investment in the company is now only worth $2.4 billion, right? So you write down your basis. So as a limited partner, what happened earlier this year is, let's say a big pension fund put a bunch of money with Tiger. They wrote a $100 million check. they all of a sudden got a notice that, hey, your investment is now worth $66 billion, or $66 million, right? So they had a 33% write down, meaning a 33% loss on their portfolio. So what happened earlier this year is Tiger wasn't, they were maybe being a little more optimistic in the valuation of their portfolio companies, and then all of a sudden just, out of left field came these massive astronomical write downs. Right. Even some companies were written down as much as 70 percent. So eventually they invested at too high evaluations. Right. They made some they made some mistakes and they invested in too high evaluations at these companies and they had to go notify all their limited partners that, hey, your investment in this venture firm is now worth a lot less. So, they were heavily scrutinized in early 2023 for these gross missteps and poor performance. You know, it's a lot easier to go out and generate a return on a smaller investment than it is a bigger one, right? It's easier to double $1 than it is 10. And it's easier to double 10 than it is 100. And so on and so forth, even in the millions and tens of millions of billions of dollars. So like Tiger's venture fund was $12.7 billion or something like that. Like it's hard to effectively allocate $12.7 billion and generate, uh, you know, really high returns. And the market's starting to understand this, that like, Hey, you know, it's actually probably better if we allocate to smaller funds because they're actually able to perform better. So there's all this data out there that smaller, uh, you know, funds do better. So note that for the nascent emerging manager, but. Anyhow, Tiger received a lot of flack. They now said, hey, look, our next venture fund, instead of being 12 billion dollars, it's going to be five. So they cut it like 70 percent. They're going to raise less money because it's easier to generate a return.

Lincoln: Hey guys, so if you want to learn more about investment funds, how they work, how they're structured, if you want to become a fund manager, how I became a fund manager, visit our YouTube channel for more free value. The link is in the show notes. Thank you.

Lincoln: I want to double click on this kind of concept of, you know, too big, too fast, because I think it's a really important principle for any fund manager out there, you know, thinking about the size of their business. So so this happens all the time and just like traditional startups, where sometime maybe let's say you're going out and starting a business and, you know, an investor offers you a million dollars for 10 percent of your company. Right. That would offer you that would put you at about you know, a $10 million valuation. And you might have a different investor come in and say, Hey, I'll give you $2 million for 10% of your stake in the company, right? You might think, you know, outside, you know, just on first glance that Hey, well, I'm going to take the investment that values my company at a $20 million business, right? And I'm going to get twice as much money for the same stake. Yes, I mean, that's true. But on the flip side, you have to now measure up to that performance. If you're ever going to go get additional financing and additional follow on investors, you need to live up to a $20 million valuation. And in a lot of cases, you're probably just not ready for that. So, you know, it's important in this world of finance not to take on too much money too quickly, but to be realistic, right? Be a realist in this world. You never want to be too optimistic or too pessimistic. You know, it's better to set expectations and then over deliver on them than set, you know, than over set expectations and under deliver because Typically at that time of under deliverance, you're going to lose your investors. You're going to lose your LPs. You're going to lose employees. Like it's just a, you know, nobody likes to see a line down and to the right. And you want to avoid that as much as possible in business. All right. So when you hear the name Tiger, right, or a Tiger fund, sometimes they're usually talking about the more recent fund, Tiger Global Management, which now manages, I think, about $40 billion in venture and private equity assets and about $10 billion in their hedge fund. But also some articles could be, you know, referencing the former, you know, Tiger strategies, right? That was in operations from 1980 to 2000. I think that there's a lot to learn from these stories and these different managers as they start their different practices. You know, always focus on alpha, operational alpha. Don't get too big too fast and get over your skis. But I would definitely say they're a firm that overall has won over the years. Despite recent missteps, they're still a juggernaut in the in the venture capital and hedge fund industry.

Lincoln: All information shared are the sole thoughts and opinions of the author. Do not take any information as legal or financial advice.

Lincoln: You should seek a certified accountant and a professional legal team before taking any further action. We are not selling or soliciting a security in any way, shape or form. This content is for educational purposes only and is not to be construed as financial or legal advice. Clients of FundLaunch or Black Card Capital Partners may maintain positions and securities discussed on this podcast.