California investor Chris Hansen, an early Facebook Inc. backer, is making high-stakes bets across the state, from investing in Pinterest Inc. to a bid to buy control of the capital’s marquee sports team and move it north.
Hansen’s hedge fund, Valiant Capital Management, led a $200 million financing round in Pinterest last week at a $2.5 billion valuation. Hansen, 45, is also leading an investor group including Microsoft Corp. (MSFT)’s Steve Ballmer that last month agreed to buy a controlling stake in the Sacramento Kings -- valuing the franchise at a National Basketball Association record of $525 million -- and proposed a relocation to Seattle.
Both deals are high-profile and controversial. Hansen’s foray into sports has met vocal opposition in Sacramento, where the Kings have spent 28 years, including 19 sold-out seasons and 10 playoff runs. Valiant’s funding of Pinterest ranks the online bulletin board among the most valuable closely held Web startups, even though it generates no revenue.
“Pinterest doesn’t have its business defined yet so you’re betting all on potential,” said Anand Sanwal, chief executive officer of CB Insights, a New York-based research firm that tracks venture capital and private equity. “You have to take it on a case-by-case basis, but we generally worry that there is bad money chasing these rock-star companies.”
While Hansen’s investing career has been in the Bay Area, his sports fanaticism traces back to Seattle. Born in San Francisco, Hansen moved to Seattle five years later and became an avid supporter of the NBA’s SuperSonics, according to his online biography. After 41 years in Seattle, the SuperSonics were sold and relocated in 2008 to Oklahoma City, where they became the Thunder.
“A lifelong diehard Sonics fan, Chris wants to see professional basketball return to Seattle and is prepared to make a significant investment in the Seattle community to make that dream a reality,” his biography says.
With investments like Pinterest, Hansen’s hedge fund is gaining visibility in San Francisco, where venture capital firms dominate the technology investing landscape.
Hansen moved to San Francisco after graduating from business school at the University of Southern California. He worked at Montgomery Securities until 2001, when he joined Blue Ridge Capital, a hedge fund started by John Griffin. Hansen spent seven years at Blue Ridge, one of the so-called Tiger Cubs, which trace their roots to Julian Robertson, founder of Tiger Management LLC.
Hansen left Blue Ridge to start Valiant in 2008, and now manages about $3 billion in assets. The firm invests in a variety of securities, including stocks, options, swaps, bonds and illiquid securities. Its private investments include technology, energy and health-care companies.
Pinterest is just the latest high-priced Internet bet for Valiant. The biggest was Facebook. Valiant, along with co- investors, started backing the social networking site in late 2010 at $12 a share, and bought stock totaling about $500 million, said a person familiar with the matter, who asked not to be named because the terms weren’t disclosed. At the time of the IPO, the Valiant Capital Opportunities Fund owned 36.3 million shares worth $1.38 billion.
In late 2011, Valiant participated in a $250 million investment in online file-sharing service Dropbox Inc. at a $4 billion valuation. In November, the firm contributed to an $85 million financing round in Evernote Corp., about six months after the Internet note-taking service was valued at about $1 billion.
Pinterest, where members share photos of clothing, food and art, may represent Valiant’s biggest risk in private technology investing, because the company hasn’t proven it can make money. And while user growth is up 300 percent from a year earlier, the disappointing public market performance of Facebook, Zynga Inc. (ZNGA) and Groupon Inc. (GRPN) shows how challenging it can be for Web companies to live up to their startup hype.
“It’s a strategy that works pretty well when things are going up, and it’s only matter of time before things go the other way,” said Eric Risley, a managing partner at investment advisory firm Architect Partners LLC in Palo Alto, California. “Then you’ve got a challenge on your hands.”
Still, the bet could pay off, Risley said. “Pinterest is a cool company that can do a lot of interesting things,” he said.
Carey DeVreker, who runs business development at Valiant, said the firm has a policy of not talking to the press. Hansen didn’t respond to requests for comment. Barry Schnitt, a spokesman for Pinterest, said in an e-mailed statement that they chose Valiant to lead the financing round because the fund had a track record of long-term investments.
Another Tiger Cub, Chase Coleman’s Tiger Global Management LLC, has been backing Web startups for even longer. Started in 2001, the hedge fund backed Facebook, Zynga and HomeAway Inc. before they went public, and helped lead an $800 million investment in SurveyMonkey.com LLC last month.
Hansen’s other investment group, the one focused on sports, purchased control of the Kings on Jan. 21 from the Maloof family, which has owned the team since 1999. The offer topped the $450 million paid for the Golden State Warriors in 2010. In addition to Ballmer, Hansen’s group includes Peter and Erik Nordstrom from retailer Nordstrom Inc.
“Chris will be a great steward for the franchise,” co- owner Gavin Maloof said in a statement after the deal.
NBA Commissioner David Stern said earlier this month that Hansen’s group submitted a relocation proposal that would have the Kings play at KeyArena in Seattle for two or three seasons while a new facility is built. The request requires approval from the NBA board of governors, consisting of league owners.
Sacramento Mayor Kevin Johnson, a former NBA All-Star with the Phoenix Suns, is fighting the relocation. Instead, he’s proposing a new arena and a change in ownership, according to Kunal Merchant, executive director of Think Big Sacramento, an economic-development organization working with Johnson and others to keep the Kings in town.
“We wish Seattle the best in terms of getting a team,” Merchant said in an interview. “We just don’t believe it should be Sacramento’s team.”
California Senate Pro Tem Darrell Steinberg, whose district includes Sacramento, stood with Johnson at a press conference last month to oppose Hansen’s plans for the Kings.
“There is an inconsistency between deciding you’re going to partner with California on one end and make a lot of money, and at the same time you take some of that money and use it to rip a key asset out of the capital city,” he said.
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