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City comment: Tiger Global and SoftBank are re-writing the rules of tech investing

·2-min read
Tiger Global has shook up the global tech investment landscape  (PA)
Tiger Global has shook up the global tech investment landscape (PA)

It’s not just workers who have more power right now — startup founders are having a whale of a time too.

Running a tech startup is a constant process of raising money. In the old days, that was a headache. Venture capitalists called the shots and deals could take months. Now, money is cheap and there are far more people who want to invest. The embarrassment of riches gives founders more power.

One London investor tells the following story: he met a founder on a Friday for an introductory meeting and agreed to a second sit-down a week later. The CEO had similar meetings lined up with several of London’s biggest tech funds before then, including a dinner on Saturday night. By Monday, our investor hears that his follow up meeting is off — the founder had already sealed a deal. Not quite back of the napkin stuff but close.

The rapid acceleration is being driven by the emergence of aggressive new investors, notably SoftBank’s mammoth Vision Fund and hedge funds. Hedge funds invested a record breaking $150 billion into tech in the first six months of the year, according to Goldman Sachs.

The most high profile hedgie in the market is US firm Tiger Global, which has sprayed billions at startups around the world. It is notorious for paying over the odds and quickly - it blew through a $6.6 billion fund in just six months and is now raising more. VCs complain of being gazumped by Tiger at the last minute and being out bid. Its investment style can be summed up as shut up and take my money.

The rise of Tiger Global has prompted much soul searching among VCs and forced many to change their tactics simply to keep up. Deals are getting quicker and ticket sizes are getting larger.

The new normal has prompted grumbling from some who complain that the likes of SoftBank and Tiger Global are distorting the market. Quicker deals means less time for due diligence and valuations are soaring to levels that even seasoned tech optimists think look stretched.

Others are more sanguine.

“If it wasn’t Tiger, it’d be SoftBank or someone else,” says one investor. “At some point it’ll be a sovereign wealth fund. There’s always someone with a lot of cash.”

For founders, it’s a dream. There’s never been a better time to start a tech business.

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