SoftBank and Tiger Global—hands down the most prolific investors in India's startup ecosystem, albeit in different moods. The Japanese Internet conglomerate is buying into promising ventures like there is no tomorrow while the US-based investment firm is looking to recoup a part of its investments made here over the years.
What started unhurriedly with a few co-investments seems to be fast evolving into a symbiotic relationship. The trigger came from parleys around the merger of their competing investments, e-tailers Flipkart and Snapdeal, notwithstanding the deal's eventual collapse. Now, there is a definitive trend—Tiger Global seems to be offloading a portion of its stakes in its leading portfolio companies even as SoftBank, courtesy of its $93-billion Vision Fund, looks eager to lap them up.
Here's how the story goes around in startup and venture capital circles. Sometime in July-August 2016, SoftBank turns down Snapdeal’s plea for additional funding. Instead it urges the company to explore other strategic options. Snapdeal indicates its willingness to join forces with Flipkart, and SoftBank encourages the move. Feelers are sent to Flipkart and Tiger Global, and the US-based investor gets interested when it realises SoftBank’s keenness. Between late 2016 and early 2017, top Tiger officials make at least three visits to the SoftBank headquarters in Tokyo.
None of the parties involved would confirm this, and there was outright denial when VCCircle first reported in August 2016 that the beleaguered Snapdeal was exploring a merger.
Much water has flown under the bridge since then, and Tiger Global stands to benefit from a hungry SoftBank’s penchant for securing sizeable stakes in leading tech and Internet startups.
In fact, the US-based fund is a step closer to booking some profit from its major Indian investments such as Flipkart and cab-hailing firm Ola, primarily through a secondary share sale to the prolific SoftBank. While a transaction is underway vis-à-vis Flipkart shares and regulatory approvals are awaited, there is an in-principle agreement with regard to the sale of Tiger’s shares in Ola to SoftBank, according to three persons privy to the development.
VCCircle first reported about Tiger Global’s plans to partially exit Flipkart with a likely three-fold return early this year, just before the e-tailer agreed to acquire the Indian operations of eBay Inc. as part of a $1.4-billion fundraising round. While there were media reports of a likely partial exit from Ola too, speculations gathered momentum after VCCircle reported last week that its managing director Lee Fixel had resigned from the taxi-aggregator's board.
The people mentioned above said Tiger Global could offload half of its 14% stake in Ola to SoftBank, which would allow the latter to up its stake to around 30% in the cab-aggregator and strengthen its position as the biggest shareholder. A report in The Economic Times quoting unnamed people said that Tiger Global would gain around $1 billion from its partial exits at Flipkart and Ola—$600-700 million from Flipkart and around $300 million from Ola.
Tiger Global, one of India's most active venture capital investors with around 50 companies in its portfolio, has drastically slowed its pace of investments in the past two years. For some time, it's been looking to recoup at least a part of the $2.5 billion it has invested over a decade.
With back-to-back negotiations—the stillborn merger of Flipkart and Snapdeal, SoftBank’s subsequent investment in Flipkart, and Tiger’s sale of shares in Flipkart and Ola to SoftBank—the powerful duo seems to be working closely.