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Happy New Year! As we step into 2024, let's kick off by diving into the key lessons we can learn from the ups and downs of Tiger Global Management in the realm of fund management.
For a deeper analysis, listen to Lincoln’s full breakdown of Tiger Global Management on his podcast, "Funds that Won."
The Origins of Tiger Management
Tiger Management was founded in 1980 by Julian Robertson, quickly rising to prominence as one of the earliest and most successful hedge funds. Julian started with $8 million, employing a global macro long/short strategy that initially led to great success.
However, as the 2000s approached, things began to unravel due to some bad investments and poor money allocation. These challenges led Julian to close Tiger Management in 2000.
The Birth of Tiger Global Management
Enter Chase Coleman, who approached Julian with a bold idea: to continue the firm with a renewed focus on technology-driven investment strategies. Julian liked the idea and provided Chase with $25 million to launch Tiger Global Management.
Julian’s legacy extended beyond his own 20-year success with Tiger Management, as he helped establish 38 different investment funds, with Tiger Global Management emerging as the most successful.
The Shift to Tech-Focused Venture Capital
Chase Coleman quickly realized that the biggest opportunities in tech weren’t in public markets or hedge funds, but rather in small, private companies. Just 18 months after its inception, Tiger Global launched a tech-focused venture capital fund, making significant investments in companies like Facebook and LinkedIn.
Lessons from Tiger Global’s 2023 Hiccup
Despite its success, Tiger Global Management faced a significant challenge in April 2023. The private markets dried up, valuations plummeted, and Tiger’s overly optimistic investments were overvalued. This forced them to notify their LPs that their initial investments had significantly decreased in value.
The scrutiny that followed led Tiger Global to reduce the volume of capital raised for their next fund. This serves as a critical reminder that managing large sums of capital can be more challenging than smaller amounts, where returns can be generated more efficiently.
The Dangers of Overvaluation
One of the key takeaways from Tiger Global’s experience is the danger of overvaluation. If a startup company is offered two different deals—$1 million for 10% of the company versus $2 million for the same stake—taking the higher offer may seem like a no-brainer. However, with a higher valuation comes the expectation of higher performance, which can be difficult to deliver on.
Failing to meet these expectations can lead to lost investors, money, and reputation. As a fund manager, it’s crucial to grow at a sustainable pace and ensure that your investments are realistic and manageable.
Conclusion: Applying Tiger Global’s Lessons to Your Fund
As we reflect on Tiger Global Management’s journey, there’s a lot to learn about managing expectations, sustainable growth, and the risks of overvaluation. Whether you’re a current or aspiring fund manager, these insights are invaluable as you navigate the complex world of investments.
For a more detailed analysis, continue listening to Lincoln’s full breakdown on his podcast, "Funds that Won."
If you’re ready to start your own fund and need guidance, visit Fund Launch to get the support you need.
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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the author
