The new unicorn hunter in town

Good Sunday to all you people except VCs. Enjoy #38 of The Tipsheet.

Eye of the tiger, it’s the thrill of the chase

Ok humans, in this edition, I’m going to talk about VCs. Now, I know nothing about VCs. But since I’m on the internet and have a blog, I’m obviously an expert on all things. So, it doesn’t matter and Imma write.

There are two kinds of people: normal human beings and venture capitalists (VCs). I hate VCs! Not all, but like 96.73% of them. Just to be clear, there are several good VCs, but they are outliers. My reasons for the hatred have nothing to do with anything superficial. I’m not as assmole⚫. I hate them because VCs are convinced they are saving the world, and more importantly, they know it. This saviour complex has made them insufferable.

Most VCs are megalomaniacs on steroids. Even godmen don’t have a god complex as exaggerated as the VCs do. I think this is partly because of the fact they are betting on cutting edge and futuristic ideas. This has given them an exaggerated sense of self and a misplaced notion of their significance to humanity. The result of this cocktail of tragedies is VCs end up thinking👇

It doesn’t end there. Several VCs think ageing is a problem to solve and want to live forever. Since they can’t swap human bodies as you saw in Altered Carbon. So, people like Peter Theil are doing the next best thing. Drink the blood of young people. Now, why would you want to like VCs and be friends with them? You’ll just be a walking talking blood bag or an organ donor for them.

For a long-time, all VCs were kinda sorta all the same. Say you had an idea and needed some money to get it started, you went to a VC. Now, the typical VC investment process is like a love story. You would propose, the boy or girl would reject you. You’d then start harassing the boy or girl with flowers, teddy bears, Sanskar TV subscriptions, Chyawanprash and what not. You’d do this for some months until the boy or girl finally agreed to talk to you.

It’s the same with VCs. You’d pitch them your idea, they’d ask you about the product, the team, vision, mission etc. Then the parade of the partners. The first partner would ask you utterly pointless questions which you, he nor anybody on the planet has a clue about. The second partner would take it to the next level with even more pointless questions “tell me, this quantum underwear idea that you are pitching us, do you think it will be comfortable to wear when we all go to Mars?”.

The third partner would put the cherry on the top. He’d ask you about the CACs, TAMs, ACVs, NPS’ and an assorted alphabet soupy list of annoying things.

Now, let me pause here for a second because I wanna say something. This is the most important thing I’ll ever say in my life. All VC and PE funds have an army of junior analysts. Now, the job of these kiddies is to look useful. But in the VC world, there’s only so much work the juniors can do. So these juniors figured out a genius hack to look useful.

On their browser, they’d keep two open tabs. One tab would have Marc Andreessen’s Software is eating the world piece open, and the other would have YouTube, Netflix, YouPorn or whatever they wanted to watch. Whenever the manager would pass by the juniors desk, the little geniuses would pretend to be reading Marc Andreessen’s piece and they’d go, “Bro, this SAAS is a money printer”. And to prove that they did some work, at the end of the day, they’d write up some nonsensical memos with new fresh fangled made-up terms like your CACs and your TAMs and you HAMs, MAPs, HATs, CATs etc.

Now listen up, junior VCs, I know you’re reading this because I know your ilk has subscribed to the newsletter. Dante Alighieri in Inferno described the 9 circles of hell. What he didn’t write about is the 10th circle of hell. That’s reserved for all you assmoles⚫ who sit all day in your glitzy air-cooled offices in the valley or कब्रिस्तान or wherever and keep making up bullshit things like CACs, TAMs, carrots, and cabbages. God gave us humans the ability to fully and clearly enunciate “Customer Acquisition Cost”, but you lazy asses turned that into “CAC”.

Once you guys die, know this. You’ll be damned to this 10th circle of hell. As I pass through heaven and when I hear you guys wailing, writhing, and screaming in agony, I’ll laugh and dance in joy and savour every moment of your misery and scream “highest NPS ever!”

Now back to our regularly scheduled programming.

After the parade of the partners, the vegetable selling part of the process would begin. Startup lelo, entrepreneur lelo.”

This is where the VCs would pretend to know the value of a startup with no or minimal product, zero revenues and a snowball’s chance in hell of a success. After all, they wasted enough of their lives reading Warren Buffett about value. This is the stage where they put that pointless gyan to work.

You’d then haggle over the value, which you have no bloody way of determining. And then the VCs would do more research, waste more time to justify their process and philosophy and bullshit. Finally, they’d give you some money. But it wouldn’t just end here. They’d take a seat on your board and meddle in the decisions making. Why? Because they know better than you – the founder who started the company. And if you did something they didn’t understand, they’d give you more pointless gyan about “founder mentality” and “winning mindset” and “Steve Jobs said” and “CAC the TAM in a HAT with a MAT” and an assortment of scented processed bullshit!

Has the gyan worked? This is a never-ending debate. There are a ton of studies that show that private equity and venture capital returns have been overblown or falling. Several other studies show that PE & VCs have delivered. But, this has always been a fraught exercise. IRR, the standard metric of measurement in the private markets is regularly manipulated. And comparing that with liquid public markets where the prices are discovered based on market activity, is not really accurate.

But, private or public, at the risk of stating the obvious, picking the right manager make all the difference, and that’s bloody hard. Some

But in 2017, Softbank, led by the Maverick Masayoshi Son, upended the VC world, which was a gentlemen’s club until then. Softbank Vision Fund 1 raised $100 billion, making it the largest fund in history. Softbank then went on a crazy bender, spraying almost $100 million a day on hundreds of companies. You ask for $10 million; they gave you $100.

Along the way, they had some spectacular failures. WeWork, in which Softbank had invested over $15+ billion went from a $47 billion valuation to a couple of billion. Katerra with almost $2 billion in investment filed for bankruptcy. Then there was the spectacular fraud in Wirecard where $2 billion went missing. Softbank had sunk a billion in the company. And then there Greensil, which was an even bigger fraud in which Softbank had invested $1.5 billion.

But the post-pandemic madness in the markets and a scorching hot IPO market spared Son’s blushes. The fund had successful exits in DoorDash, Coupang, Compass, OSIsoft, Opendoor etc.

Then came Tiger Global, which was every bit as crazy as Softbank, but it bought its own method of madness to VC investing. Tiger Global took the traditional VC playbook, wrapped it with all the other traditional VC nonsense, lit it on fire and left it on the doorsteps of traditional VCs.

Tiger inverted the VC playbook prizing speed above all else. Unlike traditional VCs, they didn’t get bogged by due diligence and valuations. They paid whatever it took to get a piece of the action.

The numbers speak for themselves, It’s investing at 8X the pace compared to 2020.

Leading the pack is Tiger Global Management, which has emerged as this year’s funding jockey, setting a blistering pace with venture firms racing to keep up. Tiger Global has invested in over 120 startups already this year, according to an analysis by PitchBook for Protocol, and shows no signs of slowing down with a $6.7 billion fund announced in April and a rumored $10 billion fund on its heels.

In the first half of 2021, Tiger Global has been aggressively cutting cheques for investments into Indian startups, participating in 15 deals worth $1.74 billion (co-led with other investors), according to YourStory Research. That’s already higher than the number of deals it led in the whole of 2020 when Tiger participated in or led investments into 13 deals worth $1.32 billion. 

And it’s still Tiger Global’s world. The New York-based crossover fund, which invests in both private and public companies, was closing over four deals per week on average in Q1, but in Q2 managed to bump that up to 1.3 deals per day

Nor do they act like traditional VCs and take board seats and pretend to be insufferable know-it-alls and meddle in the operations of startups. They just give you money, get lost, and come collect their money on an exit. This is how it goes:

Founder: Hi Chase,
Chase Coleman: Who dis? This better be good.
Founder: I’m starting a new SAAS company focus…
Chase: Bup, bup, stop!. How much do you need, and at what valuation?
Founder: Wanted to discuss
Chase: I’m in the 3rd season of Desperate Housewives. I ain’t got time for discussions. Here’s $100 million at $3 billion. You’ll get your term sheet in 1 hour.
Founder: Thank you so much, I really appre…
Chase: Hangs up

I’m serious; this is how they do it. Here’s an excerpt from this brilliant piece by Ashish:

Sources I spoke with said that by the time Tiger came calling, ShareChat had already closed its funding round at a valuation of $1.2 billion or thereabouts. But Tiger said it wanted in and asked for an entry price. Just to humour Tiger, and no one expected any sort of follow-through on it, ShareChat said the entry price was at a valuation of $2 billion. Mind you, this is within days (not months) …

Morning Context

Everett Randall in another brilliant piece:

Are Tiger & this new class of crossovers collectively dumb and/or drunk off of the spoils of a decade+ long tech bull market? Not at all. On the contrary, we are seeing the emergence of a new velocity-focused strategy in the venture/growth3 asset class that will fundamentally change the way that venture capital is raised. By breaking many long-held but outdated rules & norms of venture/growth investing, Tiger has developed a flywheel that enables them to offer a better/faster/cheaper product to founders while generating more $ gains than their competitors. Tiger is eating VC, and with the right context, I think it’s

Though everybody is shocked at what Tiger global is doing, to me, it seems like Tiger is global is doing what smart retail investors do. Replicating the playbook that has worked in the public markets over the past decade. In the last 15 odd years, investors who believe in nonsense like value, valuations, fundamentals, quality, growth at reasonable price etc., have looked at absolute idiots. They might have 100s of PHDs and supercomputers, but they’ve still looked like idiots.

The only useful thing you could do with those value investing books was to take them to your terrace, tear one page at a time, make paper rockets and throw them into your neighbour’s window. Or sell it to a Bhel Puri vendor.

What has worked over the last decade is the exact opposite of value. Pricey, high growth companies have trounced supposed cheap stocks. In other words, there has never been a better time to be a momentum investor. If you were an investor who believed in moats, boats etc., you look like a guy who sleeps under a flyover right now.

Others have made this observation, and it’s nothing new. But to me, it seems like Tiger is bringing public market-style momentum investing to private markets. They are chasing prices that are going up in the private markets, much like momentum in public markets where you buy winners and sell losers.

Being a huge proponent of indexing, I also can’t also help but notice the similarities with index funds. If you’re an index investor, you don’t care about valuations etc. You believe in the wisdom of the crowds. Some people think this is stupid, but these wiseasses have underperformed for so long, I’ll excuse the jealousy. You also index because it’s very hard to pick winning stocks. A small number of stocks will always drive all the returns:

Of the roughly 26,000 companies listed between 1926 and 2016, more than half lost money or did worse than simply holding one-month Treasuries. In contrast, about 1,000 stocks — or just 4 per cent of the entire sample — in practice accounted for all the net wealth creation over the period, or almost $35tn. 

It’s the same with venture investing, it’s a classic case of a power-law distribution. The superhits will pay for all the utter failures. Tiger is investing in 100s of the best and biggest private businesses and is essentially indexing the universe. The other similarity to index funds is their investment crossover with other well-known funds. In essence, they are riding on the coattails of other active VCs who’ve done their due diligence, much like index funds:

The firm’s most frequent co-investors in the same funding round in the last decade are venture investor Accel by a strong margin, as well as growth equity firms Coatue, DST Global and Dragoneer Investment Group


Tiger can free-ride on the top-tier VCs by effectively outsourcing due diligence to them. If the likes of Sequoia and Kleiner Perkins and Andreessen Horowitz all have term sheets out to a company, Tiger is happy to trust their judgment.


First, its portfolio of 400 companies gives it tremendous insight into the market. Tiger partners don’t need to take the steps of arranging customer interviews for diligence because a lot of their portfolio companies are already customers and they can lean on their experience, Polyakov pointed out. Second, Tiger employs an army of Bain consultants. As a result, Tiger doesn’t have to do its homework on the fly; it’s done it in advance


Will this work out? Who knows. After all, people had written off Softbank, but they seem to have had a second lease of life. And I am 100% sure, should the markets take a turn for the worse, we’ll start hearing all sorts of horror stories in the startup world. Inevitably, we’ll also see headlines that Tiger’s strategy was a failure. Like with all things in life, anybody who says they can predict the future is either lying or selling you a Ponzi scheme.

Tiger Global’s final impact may be the most profound. It reflects a shift in the balance of power between investors and entrepreneurs. Traditionally, investors had the upper hand. Startup founders pilgrimaged to Sand Hill Road, seeking not just money but valuable advice that the best vcs would provide. Competition from Tiger Global and other tourists has forced Californian vcs to offer more generous terms, monetary and otherwise. That in turn has made entrepreneurs themselves more confident. 

The Economist

Tiger Global is the culmination of two trends. The convergence of public and private markets, like the guys at John Street Capital, presciently wrote. The other trend is the fallout from the enlightenment that all the gyan and the frameworks and mental models and the bullshit that VCs have been spewing for decades is worthless. Since capital is a commodity, the only real value VCs bring to the table is fast money! Tiger understands this better than everyone.


The global shipping crisis continues to worsen. Remember, 80% of the global trade moves on the oceans. Low vaccination rates among seafarers and a COVID outbreak in the Yantian Port in China, the third-largest Asian port, are making things worse. As a result, shipping rates have continued to spike:

The spot rate for a 40-foot container from Shanghai to Los Angeles increased to a record $9,733, up 1% from the previous week and 236% higher than a year ago, according to the Drewry World Container Index published Thursday. The Shanghai-to-Rotterdam rate rose to $12,954. The composite index, reflecting eight major trade routes, hit $8,883, a 339% surge from a year ago.

GlobalX had a nice piece mapping out the entire crisis. This particular excerpt highlights the core argument here – resiliency vs efficiency:

As a result of recent supply shortages, manufacturers have been forced to rethink their use of just-in-time supply chain management. Diminished faith in ultra-complex global supply chains are causing manufacturers to consider stockpiling certain raw materials and components that are believed to be vulnerable to future supply disruptions. This shift from just-in-time ordering and supply chain management to a just-in-case mindset has exacerbated the current increase in demand.

But there are no easy answers, and decisions prioritizing one above the other can have serious cost implications for end consumers.

Semiconductor shortages

The chip shortages have hit automakers the hardest. General Motors (GM) announced a series of plant shutdowns over the lack of chips. But in a bit of good news, TSMC, the world’s largest chipmaker, said that some of the shortages should start easing.

A Goldman Sachs analysis showed that the semiconductor shortage apparently impacts over 169 industries. Bloody hell!


Good reads

1. Analysts playing the lottery (stocks)

If we deal with lottery stocks, this propensity to overweight rare events plays against us because we tend to become too optimistic about the prospects of a company. A study of earnings forecasts by professional equity analysts showed that even these professionals are not immune to this bias. The more lottery-like the return profile of a stock was, the more optimistic the forecasts of the analysts were. And the fewer information analysts had to sense-check their forecasts, the more optimistic their forecasts became. If a company is very small and only covered by a few analysts, analyst forecasts become more optimistic than for widely covered stocks. And of course, the more excessive this optimism becomes, the more likely it becomes that the forecasts are wrong. And not just a little bit wrong, but very wrong.

2. How Benchmarks Keep Pension Stakeholders in the Dark

In the report, called “Benchmark Bias of Public Pension Funds in the United States: An Unflattering Portrait,” Ennis used publicly available data to study the annual returns of 24 U.S. public pension funds from July 1, 2010 to June 30, 2020. He found that the 24 underperformed a passive strategy by an average of 1.4 percent a year. Over the same time period, the funds reported that they beat their own custom benchmarks by an average of 0.3 percent a year.

3. Saying yes, the Tiger Global way

A founder, in whose company Tiger has invested in two rounds, said there’s a broad understanding of how Tiger does things. The first time Tiger invested in his company, it took five days flat. “They don’t like to second-guess themselves or contemplate for too long,” he said and asked not to be named. “Three days, five days, that was the speed.

4. The United States of ETFs

The rise of ETFs (and passive investing, in general) put index providers in the middle of all the a action. They became a crucial cog in world finance that can make or break entire economies. So powerful, in fact, that China blackmailed MSCI to include its domestic stocks in its Emerging Markets Index, which is tracked by close to $2 trillion in assets2. And India has been working on inclusion of Indian sovereign bonds in global bond indices3.

5. Quantitative Easing: how the world got hooked on magicked-up money

The only way to call time on QE, if that is what we truly want, is to deconstruct and then reconstruct, regulate and stabilise the whole financial system, so that the extraordinary privilege of credit creation is always balanced by a responsibility not to take undue risks. And if footloose capital responds by skipping across borders and away from oversight, then we may also need to look at controls on that front too. Only then will the world stand any chance of kicking the QE habit, address those dangerous imbalances and finally escape this grim shadowland of money.

6. How does monetary policy affect asset prices?

Their findings led Daniel, Garlappi and Ziao to conclude: “Reaching for income behaviour constitutes a channel through which monetary policy affects portfolio choices, asset prices, and capital allocation across firms that differ in their dividend policy. … Thus, the reaching for income behavior leads to a link between monetary policy and financial markets that is not explained by the standard New Keynesian models of monetary policy.”

7. The Different Types of ESG Investors

In the last few decades, the ESG movement lost its way as it transitioned from doing good to doing well and from plow-minded investors to banner-minded and pseudo-ESG investors. That transition expanded the ESG movement by adding investors but degraded the movement from doing good to doing well. It is time for the movement to regain its way, transitioning back from doing well to doing good, from banner-minded and pseudo-ESG investors to plow-minded investors, and from wants for utilitarian returns for oneself to wants for utilitarian, expressive, and emotional benefits for others.

8. Stop Obsessing Over Every Penny

Let me tell you this.. Saving every penny today is not worth it. You do not need to give up everything to achieve the future you want, you just need to find a balance.

We all need to realize that life is meant to be lived to the fullest. The reason we work so hard is so we can enjoy our life right now, not so we can save every penny in hopes that when we are 65 we can finally have some fun. 

9. My ‘Too Hard’ Pile Is Pretty Big

As I reflected on it, I realized that my “too hard” pile doesn’t just include commodities. In fact, it’s pretty large and getting larger. As I’ve gained more investment knowledge–and more knowledge of myself as an investor and what I’m trying to accomplish–it has gotten easier to pass on investments because they’re outside my own circle of competence (Buffett and Munger’s definition of “too hard”) or require more time or patience than I’m able to put into them.

10. Tech in Africa

Remains of the week

The future of work has arrived. Finance as culture. Low- or High-Volatility stocks? The rise and fall of Kodak. The Science of Nerdiness. How Should We Do
Drugs Now? 

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