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Tiger Global Management, the world’s most active startup investor last year, is trying a new way to get the inside track.

Partners at the firm, known for its big bets in companies including Coinbase and Roblox, have committed $1 billion of their own cash to invest in seed funds that focus on backing the youngest startups, said a person with direct knowledge of the matter. Under the initiative, the partners would invest a little over $300 million in the funds every year, the person added.

The commitment, unprecedented for its size, would allow Tiger Global to become the largest investor in dozens of new seed funds that would want its cash. The firm would then get exposure to more early-stage startups it could invest in later. So far this year, Tiger Global has already backed or agreed to back funds for more-established firms including Better Tomorrow Ventures, Moxxie Ventures and Chapter One Ventures, a separate person with direct knowledge added, as well as less well-known funds such as Maple VC.

THE TAKEAWAY

• Tiger partners are putting their own money into seed funds

• Investments should help Tiger secure early-stage VC deals

• Better Tomorrow Ventures, Moxxie, Chapter One agreed to take Tiger cash

And the firm is staying true to its aggressive approach. In October 2021, Maple VC general partner Andre Charoo asked Tiger Global to invest in his new $16.5 million fund after hearing that the firm was backing other new fund managers. Tiger agreed to invest $2.5 million—the largest check in the fund—less than eight hours after receiving the investment deck, Charoo said.

The move shows how Tiger, which invested in more startups than anyone else last year, is shifting its focus to back younger companies amid a broader sell-off in public technology stocks. The firm, known for its flagship hedge fund, has rattled Silicon Valley in recent years by paying high prices for multibillion-dollar private companies, including data labeling firm Scale AI and banking app Revolut.

But over the past few months, the New York–based investment firm’s public stock portfolio has been hit hard by the sell-off. Tiger’s flagship hedge fund, which is separate from its private funds, lost 10% last month and is down 23% for the year, according to Bloomberg. Amid the retreat, Tiger also made the rare decision to lower the prices it offered for larger startups even after signing the initial investment agreements, The Information earlier reported.

Venture firms or their partners regularly act as limited partners in seed funds as a way of getting early financial knowledge about startups and making connections with founders. For example, Andreessen Horowitz partners Marc Andreessen and Chris Dixon as a duo have written checks ranging between $100,000 and $1 million to back small funds to gain early insight into promising startups, The Information reported in 2020.

But no firm has deployed the strategy at Tiger’s scale. A $1 billion commitment would allow Tiger to invest in dozens, if not hundreds, of seed firms. These firms usually operate small funds that take commitments of just a few million dollars from limited partners, deep-pocketed external investors that usually include pension funds and endowments. Tiger’s checks have ranged from $2.5 million for smaller funds like Palo Alto, Calif.–based Maple VC to $15 million or higher for more-established firms, said three people with direct knowledge of the matter.

It’s unclear why Tiger’s partners are committing their own cash instead of investing out of their existing venture funds or a new fund. But the personal stake underscores how serious the firm is about its focus on early-stage investments.

In September, it hired new investor Grant Ebenger from private equity firm Blackstone to help work on the new seed initiative, said the person with direct knowledge. Then, earlier this year, Tiger partner Scott Shleifer told Tiger’s own investors it would avoid late-stage funding rounds to focus instead on backing Series A and B companies, The Information earlier reported. In recent pitches to some investors of seed funds, Tiger’s partners said they intended to move quickly when deciding to invest in their portfolio companies’ subsequent funding rounds, said another person with direct knowledge of the matter.

Indexing the Market

Tiger’s full-throttle push into early-stage investing is another sign that the influx of capital going into the private market won’t dry up anytime soon, even as large investment firms like D1 Capital Partners slowed their investment pace amid concerns about the sell-off in technology stocks. Tiger Global as of January had raised more than $11 billion for its latest VC fund, The Information first reported. Earlier this month, San Francisco–based VC firm Founders Fund announced it had raised over $5 billion for two new funds dedicated to private investments.

Tiger’s shift toward the early-stage market could give it a bigger shot at outsize returns, regardless of market volatility, because it will be backing companies long before they prepare for a public listing. The strategy also comes with its own risks: Such startups are often run by inexperienced executives whose products are still in their infancy, reasons why Wall Street investment firms focused on backing more mature startups during the pandemic boom in tech investing.

At least one seed firm also did not want to have Tiger as a limited partner for future funds, in part because it had enough existing investors and didn’t want to seem beholden to another VC firm when pitching founders, said an investor involved in the discussions.

Tiger Global, led by partners Scott Shleifer and Chase Coleman, has already inked more early-stage deals this year than some competitors. The firm has invested in 36 seed and early-stage funding rounds, according to data firm PitchBook. By comparison, Sequoia Capital has invested in 20 seed and early-stage deals, according to PitchBook.

The influx of new capital going into early-stage investing has pushed more traditional seed firms to adapt their business models. Seed firm Homebrew, an early investor in fintech app Plaid and consumer bank Chime, in February said that, rather than raising a larger venture fund, it would take the opposite tack—turn itself into a family office, where its partners would only invest their own capital in startups.