• Coatue Management is competing with some of the most powerful venture capital firms in Silicon Valley for a piece of the hottest startups, and is winning.
  • So far in 2020, the hedge fund wrote checks in 14 unicorn startups, or companies that are valued at more than $1 billion. They include Airtable, Rivian Automotive, Chime, and Impossible Foods.
  • In unicorn deals where it participated, Coatue led the round half of the time, according to a Business Insider review of PitchBook data. It indicates that startups see the value of working with the fund.
  • Coatue, run by Philippe Laffont and his brother Thomas Laffont, did not respond to a request for comment.
  • Visit Business Insider’s homepage for more stories.

A hedge fund is flying high over the startup world.

Coatue Management, a type of fund that raises outside capital to invest in a smorgasbord of asset types, has written checks into at least 14 unicorn startups so far this year, including breakouts like Chime, Airtable, and Rivian, according to data from PitchBook and media reports.

Its track record pits the hedge fund against some of the most well-endowed venture capital shops in Silicon Valley, who are all fighting for a stake in the hottest growth-stage startups before they go public or get acquired.

Traditional hedge funds tend to gravitate toward assets like stocks, bonds, currencies, and real estate and to allow investors to cash out periodically. But in recent years, hedge funds like Coatue and Tiger Global grew hot on startup investing because of their potential for large returns, even if those profits take longer to realize than other assets.

The ripple effects of the coronavirus pandemic have accelerated that strategy, Business Insider’s Callum Burroughs writes. The market swings and near-zero interest rates have made traditional investment strategies less appealing.

Coatue is one of the more successful hedge funds to try out this approach, with early bets on Uber, Lyft, and Snap.

And this year’s investments into prosperous unicorns could produce quite a haul for Coatue when those startups are no longer startups, through a sale or an exit to the public markets.

 

Coatue’s band of unicorns includes companies across multiple industries and geographies. A unicorn is defined as a venture-backed company that’s valued at more than $1 billion by its own private investors.

Coatue’s 2020 portfolio has a combined value of $51 billion, not including Rivian Automotive, Impossible Foods, and Chinese electric automaker Xpeng, whose valuations were undisclosed at their last financings. In August, Xpeng went public through an initial public offering.

That figure also includes only unicorns that raised from Coatue this year. There are six more billion-dollar startups in the portfolio, such as DoorDash and Figma, that closed on new funding in 2020 where Coatue did not participate.

impossible foods

Impossible Foods raised new financing in a round led by Coatue Management in 2020.

Beck Diefenbach/Reuters


But in deals where it participated, Coatue led the round half of the time, meaning the hedge fund put in more money than other investors for the largest slice of ownership. It most recently wrote the biggest check into Attentive, which sells marketing and analytics software that lets retailers customize text messages to customers based on their data.

The most valuable startup among them is Chime, a fintech that offers basic banking services on a mobile app. After it reported record signups during the pandemic, the neobank closed on $485 million in new funding in September, giving it a $14.5 billion valuation. It passed Robinhood as the most valuable financial services startup in the US.

A hedge fund can move faster on deals than traditional venture capital offices, which could explain Coatue’s recent success.

Coatue was seeded by the ‘tiger king’ of hedge funds

Coatue is a so-called Tiger Cub hedge fund because its founder, Philippe Laffont, worked with Julian Robertson — whose legendary hedge fund Tiger Management has helped spawn hundreds of new hedge funds.

Before that, Philippe was a day trader during the dot-com era, investing in tech mammoths like Microsoft and Intel with his brother, Thomas. Eventually, Philippe took took seed funding from his former boss to open his own shop.

philippe laffont coatue

Philippe Laffont, founder and portfolio manager of Coatue Management

Eduardo Munoz/Reuters


Coatue invests in mostly tech companies, both public and private, through funds raised from private investors.

The firm says its secret sauce is data: It spends millions of dollars on data “to feed its algorithms” every year and has an army of engineers who review the data to uncover investment opportunities, The Information reported.

Coatue had $17 billion under management in 2019.

At least one big miss, too

mobike ofo chinese bikeshare company

Ofo and Mobike bike share riders wait for the traffic light at a busy intersection in Beijing, China, in 2017.

Ann Hermes/The Christian Science Monitor via Getty Images


It’s less risky to invest in the growth stage when a company can show there’s demand for its product or service, and there’s less chance of going under. Those startups are also closer to returning investor dollars than early-stage startups are. Of course, there’s no guarantee that every unicorn ends up a successful publicly traded company or big acquisition. Some are mere horses.

Coatue was a late-stage investor in Ofo, the now-defunct bike-sharing startup in China. Insiders said it couldn’t make up the costs of operations, with bikes breaking or going missing all the time. It burned through more than $2 billion in funding from investors like Coatue, Alibaba, and Didi Chuxing, before rolling to a stop in 2019.

Coatue, run by Philippe Laffont and his brother Thomas Laffont, did not respond to a request for comment.

However, Philippe Laffont told The Information’s Jessica E. Lessin that the story has “yet to be written” about bike-sharing. “It is a very young industry, and the hardware is improving through things like identity verification,” he said.

One thing is certain: Coatue is a vehicle that Silicon Valley’s venture capitalists are watching.

Are you in venture capital with insight to share? Contact Melia Russell via email at [email protected] or on encrypted chat app Signal at (603) 913-3085 (no PR inquiries, please). Open DMs on Twitter @meliarobin.

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