Crossover Funds: The 3 Secrets to Tiger Global's Velocity of Winning Deals & Outsized Returns
This is what happens when you outsource anything that isn't an investment decision.
I wanted to unpack this amazing overview from John Coogan. Screenshots and insights are referenced from this referenced video. In the past few months, hedge funds are pouring capital into deals much faster. These hedge funds are crossing over into venture. Tiger Global has managed over $30B.
Fast & Efficient Due Diligence
VCs normally need to have several meetings to meet the founder and spend hours of time to lead due diligence into a decision.
1st founder meetings with Tiger feels like partner meetings. They have all the information and diligence complete to close the investment extremely quickly.
They make things much more seamless for founders, don’t require a board seat, and let the founders run the company which lets the company scale aggressively on their own. Tiger trusts the founders to make the right decisions and the clearest path to go public. Since they are used to working in public markets, they don’t need to immediately sell
Overpay to Win Deals
Overpaying allows to deploy capital for lower returns, but still generates an aggregate return which is much higher due to the mere velocity of doing deals much faster.
You can visually see this in the image below when you simply compare the multiples. If you deploy a billion in 1 year vs. 3 years and just 2x, you still make a billion vs. the $700m at the 3x.
In Summary, Breaking all the traditional rules is actually making this better for founders for faster decisions, better terms, and making earlier stage investors more aggressive.