John Foley had been trying for two years to raise new funding for Peloton Cycle, a startup that sells $2,000 bikes for spinning classes along with software. Then Lee Fixel came calling.
Fixel, a partner at hedge fund and private equity firm Tiger Global Management LLC, quickly offered to put $5 million into Peloton. That helped lead to a $10.5 million round last month for the 43-person startup, which is based in New York.
The investor’s interest in his small company and knowledge of the industry “was refreshing and surprising,” Foley, 43, said.
Fixel, 34, is leading a pack of money managers who have become a force in startup dealmaking and who are increasingly stealing a march on the usual startup financier: venture capitalists.
Along with T. Rowe Price Group Inc.’s Henry Ellenbogen and Valiant Capital Management’s Christopher Hansen, the investors hail from big institutions that traditionally were tied to public-company investing. Yet in the past few years, they have poured capital into late-stage technology startups including Facebook (FB) Inc. and Twitter Inc. before they went public, fueling valuations and an easy-money environment that some are calling overheated.
Now Fixel, who co-heads Tiger Global’s investments in closely held companies, is taking the firm into even younger U.S. startups including Peloton and Kitchensurfing Inc., an online marketplace that matches chefs with diners. That puts the New York-based investor squarely onto the turf of the venture capitalists who typically focus on earlier-stage companies.
“This is Lee’s 2014 version,” said Wences Casares, a technology entrepreneur and investor based in Palo Alto, California, who tried putting money into Peloton only to find that Fixel had already bought in. Getting into younger companies and reaching out earlier to founders “is a brilliant move because once a company starts a competitive fundraising process, the valuation goes up,” Casares said.
Fixel’s recent focus on younger startups signals concern over valuations of later-stage Silicon Valley companies, according to people familiar with his thinking. For that reason, Fixel, a Florida native who previously worked as an emerging markets Internet analyst, may turn to investing more internationally, said the people, who asked not to be identified because the information is private.
Some venture capitalists aren’t welcoming the later-stage investors crowding into younger companies, which can push up valuations of startups and make it harder to reap outsized returns. Entrepreneurs should stick with venture capitalists, said Dana Stalder, a partner at Palo Alto-based venture firm Matrix Partners, which focuses on early-stage investments.
“There’s a great deal of value in raising rounds from professional early-stage investors, whose job is to help founders to go from zero to market-fit products and from there to generating revenue,” Stalder said.
All told, Tiger Global has made 84 investments in 70 closely held technology companies worldwide since 2006, the year Fixel joined the firm, according to data compiled by Bloomberg. Those companies, including Redfin Corp., One Kings Lane Inc. and Eventbrite Inc., have raised a total of $3.6 billion, according to the data.
Tiger Global’s investing pace in private technology startups is similar to some venture-capital firms. Silicon Valley venture firm Andreessen Horowitz said it has invested in 60 private companies since its 2009 founding. Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.
Fixel declined a request for an interview and issued a statement about Peloton, which offers access to real-time spinning classes through video software and which customers pay a subscription fee to use. Fixel said he invested in Peloton, which is named for the French word for cyclists riding in a platoon, because it “is disrupting the traditional at-home fitness market with its unique subscription business model,” and “the indoor fitness equipment market has lacked real innovation.”
Tiger Global was started in 2001 by Chase Coleman, a so-called Tiger cub of veteran hedge fund manager Julian Robertson. Coleman has long had an interest in technology, calling his fund Tiger Technology until a 2005 name change.
The New York-based firm has two businesses -- a hedge fund, and a private equity and venture capital fund -- each with about $6 billion in assets. The venture business, which started in 2003, recently raised an eighth $1.5 billion fund for high-growth technology investments.
Tiger Global’s funds have generated returns of 10 percent to 50 percent, for a total average annual return of more than 25 percent, according to two investors in the funds, who asked not to be identified because the data is private.
Carolyn Sargent, a spokeswoman for Tiger Global, declined to comment.
Fixel grew up in Fort Lauderdale, Florida, and majored in finance at Washington University in St. Louis, spending time as an exchange student at the London School of Economics and Political Science in 1999. He joined Tiger Global after working as an analyst at hedge fund Alkeon Capital Management.
Fixel, who co-leads Tiger Global’s venture and private equity practice with Scott Shleifer, focused his investing on emerging markets, including bets on Russian search engine Yandex NV (YNDX) and Argentinian e-commerce site MercadoLibre Inc. (MELI)
In 2009, Fixel turned to late-stage Silicon Valley investments in Facebook and LinkedIn Corp. (LNKD) Both were hugely successful, leading to more U.S. technology deals.
Investors and entrepreneurs who have worked with Fixel describe him as smart, analytical, humble -- and fast. That aggressiveness was on display last month when Tiger Global led an $80 million financing of question-and-answer website Quora Inc.
Fixel approached the Mountain View, California-based company, which was founded by former Facebook executive Adam D’Angelo, before it needed another round of financing, said Marc Bodnick, the company’s head of business.
“Lee is a confident investor who showed he knew Quora well” before doing due diligence, Bodnick said.
After Fixel invests in a startup, he can be hands-on. He sits on the board of online survey company SurveyMonkey Inc., which he helped recapitalize as part of a group that put in $440 million in equity in January 2013; the company also raised $350 million in debt. Since then, he has advised the Palo Alto-based company on its expansion in Turkey, Russia and Brazil.
“Lee and the team at Tiger have been instrumental in helping us think through our international strategy,” said SurveyMonkey Chief Executive Officer Dave Goldberg.
This year, Fixel has revved up the pace of early-stage startup investments, beginning by leading a $15 million round in March in New York-based Kitchensurfing. After using the chef-matching service once, Fixel asked Union Square Ventures partner Andy Weissman, who sits on Kitchensurfing’s board, for an introduction to the company’s co-founder, Chris Muscarella.
“Lee is looking to invest in companies which can create an enterprise value of at least $1 billion in a short period of time,” Muscarella said in an interview. He said Fixel convinced him to take Tiger Global’s money to fund the company’s growth -- before he was even ready for that.
“Lee quickly pushed the conversation to another level and moved very fast,” Muscarella said.
For Peloton’s Foley, Fixel’s investment was a lifesaver. While the company had earlier raised money from angel investors and on crowdfunding website Kickstarter, it needed more cash. Foley said he pitched Peloton to at least 100 Silicon Valley venture capitalists without getting takers.
So when Fixel struck a deal -- which spurred others to also take an interest in grabbing a piece of the company -- it made it seem “as if I had got a date with Jennifer Aniston after being rejected by many girls,” Foley said. “Lee wired the money a week later.”
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