It's easy for investors to take big bets on companies like Google and Facebook. It's much more challenging to find the fledgling startup that is set to become the next industry titan.
For decades, hedge funds have dominated public markets, through activists demanding major changes at blue-chip stocks or quants supercharging the speed of trading. Now managers are turning toward private markets, investing billions into top startups.
The patience of many of the hottest companies in the world pulled the industry in. In 2020, 20 unicorns went public, including Airbnb and Palantir. These companies waited an average of 11 years before going public, compared with just five years in 2011, according to an analysis by the Financial Times.
"To many of our clients, the private markets have become increasingly important over the past few years, and we only expect continued growth in the space," said Tiger Williams, the founder of Williams Trading, a trading-execution firm that has clients in public and private markets.
Managers like Tiger Global are pumping so much into private markets that traditional venture capitalists are grumbling that they can't find any deals for their own clients, and more firms are expected to get in. A new hedge fund from Alex Karnal and the former Bridgewater executive Brian Kreiter, named Braidwell, plans to invest across public and private healthcare companies, for example.
Insider compiled a list of the top 20 dealmakers at the most important shops. Titles vary from analyst to founder, but all are heavy hitters in their section of the market.
Scott Shleifer, head of private equity, Tiger Global
While many funds have just recently come around to private markets, Tiger Global has been involved for close to two decades, thanks to Scott Shleifer.
He heads Tiger Global's private-equity investing arm, a practice he cofounded with the billionaire firm founder Chase Coleman in 2003. He was an early investor in China but has invested in startups based in the US, Latin America, India, and Russia, among others.
Since its inception, Tiger Global's private-equity business has invested in more than 400 companies in more than 30 countries and has produced a net internal rate of return of 26%, according to a person familiar with the firm. This year alone, 22 of Tiger Global's portfolio companies have gone public, representing $2.2 billion of investments and about $7.5 billion of gains.
The success has been good for Shleifer personally as well. He bought one of the most expensive homes ever sold in the US, a $122.7 million Palm Beach, Florida, mansion, earlier this year.
Brian Kaufmann, head of private investments, Viking Global
Another Tiger Cub on the list, Viking Global is one of the biggest crossover firms in the space. The Wall Street Journal reported earlier this year that the manager is planning to raise $1 billion for a dedicated private-equity fund that will close on October 1.
The firm led a $130 million round for the cloud company Druva in 2019 with $107 million coming from Viking alone, pushing the startup into unicorn territory. This year, Druva raised money at a $2 billion valuation as Viking's investment has doubled in less than two years.
Brian Kauffman leads the private-investment team for Viking, and in 2019, the firm told investors that it was adding two members to the five-person team to keep up with demand. The firm also placed early bets on Uber and BridgeBio Pharma, both of which have gone public.
Chris Garabedian, founder of Xontogeny and portfolio manager of Perceptive Advisors' venture funds
Chris Garabedian spent more than two decades working at various biotech companies before switching to the investment side with his startup incubator, Xontogeny.
Looking for capital for Xontogeny, Garabedian had conversations with the healthcare investor Perceptive Advisors, run by the billionaire founder Joseph Edelman.They reached a partnership in which Xontogeny would continue to incubate young companies, but Garabedian would invest within the Perceptive framework via a venture-capital fund. The first fund, which raised $210 million in 2019, was rapidly deployed, and they raised $515 million — with an overall demand of $1 billion — for the second fund, Garabedian said.
The partnership between his incubator and Perceptive has let Garabedian get in early on some of biotech's promising players, such as Bioharmony Therapeutics, which is working to develop treatments to antibiotic-resistant bacteria.
"We can take our best ideas and call up Adam and say we want a read from your best analyst on this," he told Insider, referring to Adam Stone, Perceptive's chief investment officer. "If you like it and we like it, then we know we are onto something. If all goes well, I've already kind of pre-cleared the next investment."
Edwin Jager, head of fundamental equities at D. E. Shaw
The quant giant D. E. Shaw might not be the first firm that comes to mind when you think of private-market investing, but the $55 billion manager invests in the startups through its fundamental-equities strategy, run by Jager. The strategy includes traditional long/short, special situations, activism, and privates, and takes long-duration, concentrated positions, with a fair amount of attention on the technology, media and telecom, including fintechs.
D. E. Shaw looks globally for startup investments, especially in China, where Jager said the firm has found deals through word of mouth from its team in Hong Kong. To run due diligence on potential private bets, the firm uses alternative data sources to get a sense of a company's standing in an industry.
Private investing "has been a focus for our team over the last several years, and we expect it to remain so," he said. Past private investments from the firm include Spotify and the internet-of-things company Altierre, which D. E. Shaw was the lead investor in.
Dan Gwak, managing partner, Point72
Dan Gwak is the point man for the billionaire Steve Cohen on all things private markets. Before joining Cohen's firm, Gwak was a partner at In-Q-Tel, an investment firm that finds technology companies that can support the US intelligence community.
Point72's private-investing business includes two arms — the firm's venture-capital business and Hyperscale, an artificial-intelligence-driven private-equity business. Hyperscale, which started in 2019, uses AI to help its portfolio companies become more efficient and profitable.
The ventures team is more robust, with more than 30 people on the team, the firm said. The business invests Cohen's personal capital as well as that of other Point72 employees, and it has written checks from $250,000 to $50 million since it launched in 2016. Combined, the two businesses have deployed more than $500 million, and investments from the venture side include Privacera, Acorns, DriveWealth, and dozens of others.
John Curtius, head of software investing, Tiger Global
A member of Business Insider's 2020 list of rising stars in finance, Curtius is well known to private software companies looking for their next infusion of capital.
The Los Angeles native got his feel for the private markets when he started his career at the private-equity firm Silver Lake before moving to the hedge-fund world with time at Paul Singer's Elliott Management. He joined Tiger Global in 2017 and has been a part of investments into startups such as Snowflake, Databricks, Hyperscience, and more.
Alex Sacerdote, founder, Whale Rock Capital
Alex Sacerdote has run $13 billion Whale Rock since 2006 but only began investing in private markets last year. After testing the waters though, the firm has dived into the space, putting $800 million into 20 investments since last April. Checks written by the firm have ranged from $15 million to $100 million.
Names include the Brazilian fintech giant Nubank as well as Divvy, Confluent, and HashiCorp. A person close to the firm told Insider the private-investing strategy is not all that different from how the firm, which invests primarily in technology, evaluates public investments. The investment team evaluates both public and private opportunities simultaneously.
The manager is focusing on later-stage private companies right now and has seen some immediate results — of the nine private investments the firm made in 2020, three have had IPOs, another has been acquired, and one filed to go public.
Michael Lee, head of private investments, Lone Pine Capital
Along with being an analyst on Lone Pine's 14-person investment team, Lee is also in charge of finding private investments for the Tiger Cub, which was founded by the billionaire Stephen Mandel Jr. and now run by the firm's three portfolio managers, David Craver, Kelly Granat, and Mala Gaonkar.
Among Lee's responsibilities, beyond searching for investment opportunities, is connecting with other private investors who can serve as potential partners in funding rounds, a person close to the firm told Insider. The firm's private-investing focus is in e-commerce, software, and payments, and Lone Pine recently told investors in a letter this year that it is increasing the percentage of its flagship fund that can be invested in private companies from 5% to 15%.
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Private bets, which have to be unanimously approved by Craver, Granat, and Gaonkar, include Sweetgreen, Glossier, Outreach, and Torchy's Tacos, among others.
Gaurav Kapadia, founder, XN
The Soroban Capital cofounder Kapadia was originally trading under XN as a family office before accepting outside capital and launching as a hedge fund 12 months ago.
According to the Financial Times, which reported on a letter Kapadia sent investors at the end of last year, his fund can invest up to 35% of assets into private companies. The firm's private portfolio already includes at least 10 investments, including Impossible Foods, the chipmaker Groq, and AMP Robotics. XN led the Series B round for AMP Robotics and the Series C for Manticore Games.
Dan Sundheim, founder, D1 Capital
Viking Global Investors' ex-chief investment officer Dan Sundheim has made waves in private markets since he started his own fund, D1 Capital, in 2018. A little less than a third of D1's capital was invested in private-market bets, Insider reported last year.
This year, the $21 billion hedge fund, under Sundheim's guidance, has led more than 35 investments in privately held startups across the globe, including in the corporate spend management software Ramp, the e-commerce grocery platform Instacart, and the Hong Kong-based trucking company Lalamove.
The fund has also made some high-profile exits in 2021 as portfolio companies like Squarespace and DLocal went public. Sundheim, a legendary networker who one former colleague called "the LeBron James of investing," hosts a group chat for founders of his portfolio companies to connect and is known for sending late-night musings on the market to them.
Paul Eisenstein, founder, Vetamer Capital
A new fund that just launched at the beginning of the year, Vetamer aims to play in both the public and private markets and in fintechs. Founded by the Lone Pine veteran Paul Eisenstein, the $350 million manager has already made a few private investments, including the UK-based digital bank Monzo's latest round.
Internally, the managing director Matt Heiman runs point on private investments, with Eisenstein having the final say in all decisions. A person close to the firm described the manager's timeline as Series B and beyond, with a focus on a startup's fit in the overall market to justify the valuation.
Robert Schwartz, managing director, Third Point Ventures
For more than two decades, Robert Schwartz has run the venture arm of the billionaire Dan Loeb's firm out of Menlo Park, California. The firm's investments run across different sectors, primarily technology and healthcare, with a special focus on fintech.
Two of the firm's biggest wins are Upstart, an AI lending platform that Third Point owns over 15% of, and cybersecurity company SentinelOne, which Third Points owns a tenth of. Schwartz has been on the boards of both now-public companies since 2015.
Current portfolio holdings include the Fortnite creator Epic Games and Grab, the Southeast Asian food-delivery app. The firm invested in companies like Lyft, SoFi, and Palantir while they were still privately owned.
Glen Kacher, founder, Light Street Capital
From Series B to Series F, Light Street Capital has been active in private markets, investing in some of the more promising technology startups, including Chime and Toast.
The founder Glen Kacher played the private markets long before it was typical for hedge funds to do so. He worked at the hedge fund Integral Capital Partners and invested in private companies like OpenTable before starting his own fund in 2010. Integral was started by the early tech investors Roger McNamee, John Powell, and the partners of the venture firm Kleiner Perkins Caufield & Byers, and the firm's portfolio was 25% private companies.
At Light Street, Kacher and his deputies — a group that used to include Jay Kahn, a former partner who has started his own fund this year — are fundraising their second fund focused only on privates, according to Institutional Investor, with the goal of accumulating $350 million.
Prateek Bhide, principal, D1 Capital
The D1 Capital principal Prateek Bhide has followed in the footsteps of his boss, Dan Sundheim, leading growth-stage private investments in the tech sector in addition to public-equity investing. The wealth-management technology platform Addepar is one of his recent wins, with D1 Capital investing $150 million at a valuation more than $2 billion in June.
Bhide joined D1 in its first year, 2018, after five years investing at the hedge fund Farallon Capital Management and two years as an analyst in Blackstone's restructuring group.
Thomas Laffont, cofounder, Coatue
The Tiger Cub Coatue has made 25 private investments in the second quarter alone, making it one of the most active startup investors, rivaling large venture-capital firms, according to CB Insights. The firm, founded by the brothers Philippe and Thomas Laffont, leverages their complementary strengths, with Thomas leading its private-investment strategy.
Under Laffont, Coatue made a name for itself in the startup investing world through early bets on Uber, Lyft, and Snap, while its more recent investments include Airtable, Impossible Foods, and Rivian. Insider reported last year that in unicorn deals in which Coatue participated, it led the funding round half of the time.
Arielle Zuckerberg, partner, Coatue
The Coatue partner Arielle Zuckerberg, the younger sister of the Facebook cofounder Mark Zuckerberg, helped Coatue win a $30 million funding round for the video-streaming startup LiveControl against venture capitalists who were meeting with the firm that same week, Insider reported.
Zuckerberg, who formerly worked at the venture firm Kleiner Perkins Caufield & Byers as well as Google, connected with LiveControl's founder because of her deep understanding of their product informed by her hobby as a DJ. She joined Coatue in 2018 to spearhead their early-stage fund alongside the venture-capital veterans Matt Mazzeo, Yanda Erlich, and Matt Mulvey, per Forbes.
Colin Beirne, partner, Two Sigma
The quant hedge fund Two Sigma brought its data science-based approach to venture investing in 2012, when Two Sigma Ventures was born. Since then, Two Sigma Ventures has made more than 75 investments, many led by the founder Colin Beirne. Beirne has led rounds at the machine vision startup Compound Eye, the robotics developer Anki, and the onboarding-services platform Remote. The venture firm leverages Two Sigma's data expertise in scoping out startups — it built a data-driven artificial-intelligence tool called Georges that creates a weekly list of prospects, Insider reported in May.
Beirne told Insider that Two Sigma Ventures was founded to leverage data science throughout three stages of the investment process — sourcing, evaluation, and support of companies. Beirne said that every year, 100 to 200 of Two Sigma's employees get involved in one of those three stages, partnering directly with Two Sigma Ventures to lend their expertise.
The venture fund has its own pool of capital, separate from the firm's funds focused on investing in the public markets.
"While we have a lot of advantages that come from Two Sigma, we operate more like a traditional venture-capital fund," said Beirne.
Tom Hill, chairman of private investments, Two Sigma
The hedge-fund veteran Tom Hill was appointed to the newly created role of chairman of Two Sigma's private investment business in March. Hill is well known for his 25 years at Blackstone, including as president and CEO of its alternative-asset-management arm and board director of Blackstone Group. He helped build out Blackstone's hedge-fund solutions business from less than $1 billion to more than $75 billion in assets under management before he retired in 2018.
Hill has been advising Two Sigma ever since and now oversees all four of its businesses under the private investment umbrella — Two Sigma Ventures; Two Sigma Real Estate; Two Sigma Impact, a private-equity investment arm focused on workforce impact;and Sightway Capital, also a private-equity business, focused on data-rich companies.
David Singer, partner, Maverick Capital
The billionaire Lee Ainslie's hedge fund Maverick Capital is not new to private investing. While its public-stock investments brought it lucrative returns ahead of its fellow Tiger Cubs earlier this year, it has been investing in private companies since 2004. The San Francisco-based managing partner David Singer launched and still leads Maverick Ventures, Maverick Capital's dedicated startup investment arm.
In April, Singer raised $600 million for Maverick Ventures' third fund, which is uniquely structured as an open-ended "evergreen fund" without an expiration date, Forbes reported. Singer, who himself is a three-time founder, has focused his efforts investing in healthcare and e-commerce. Notable recent wins include the South Korean e-commerce company Coupang's public debut this year and the primary-care clinic operator OneMedical's IPO last year after Maverick first invested in both in 2011.
Daniel Krizek, portfolio manager, Surveyor Capital
Surveyor Capital, a division of the Chicago-based hedge fund Citadel, is one of several arms of Ken Griffin's firm that invests in public equities, but lately it has expanded more into venture-stage private investments, particularly in healthcare and biotech companies. Surveyor has participated in funding rounds this quarter for Turnstone Biologics Corp., Nimbus Therapeutics, and NiKang Therapeutics, among others.
Daniel Krizek, who has been with Surveyor since 2017, has led many of these investments in innovative segments like gene therapies, immuno-oncology, and cell therapy. Before joining Surveyor, he spent more than seven years at Bain Capital, where he invested in both private and public healthcare and biotech companies. A person familiar with Citadel told Insider that Krizek has been involved in more than 100 biotech deals in his career and that his team attends dozens of industry conferences and visits the labs of potential investments.
Originally from the Czech Republic, Krizek has already invested in 35 private companies this year, 15 of which have gone public or were acquired.
