The second quarter of 2021 saw a particularly record-breaking year, with the number of unicorns increasing six-fold, mega rounds increasing 200%, and exits increasing 100% compared to the same period last year, with the trend toward larger deal sizes becoming more pronounced for later investors. However, negative comparisons (such as the decrease in exits in Q2 2020 due to the pandemic) should be taken into consideration. A new trend was the increase in IPOs in Q2 2020, with 80-90% of exits being M&A, but 80-90% of exit value being IPOs. The number of unicorns is growing at a pace that will close in on 1,000 by the end of the year (728 as of June 2021), and Tiger has invested in the largest number of these, 115 companies.
While traditional VCs have an early investment ratio of 40-50%, Tiger, which focuses on later rounds, is not as high at 8%. Tiger makes high-turnover investments, but A16z also invests at a high pace, with larger early rounds, an increase in mega-rounds, and shorter unicorn rounds. A16z increases M&A exits by nurturing the acquiring party, but Tiger invests mostly in new companies and does not have a story-driven approach to nurturing with a long-term perspective. Traditional VCs prioritize M&A over IPOs, which take time and require long-term commitment from LP investors, but Tiger prioritizes IPOs and its strategy is to return returns to investors in the short term through pre-IPO investments and high-turnover investments.
By comparing A16z and Tiger, we analyze the strengths and weaknesses of traditional VCs and NTIs, and get a glimpse into the cutting-edge business model of VCs.
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