MUMBAI: While Tiger Global, the vaunted New York-based investment fund, has captured headlines over the past few months across the technology and investing world for being a deal machine, an unexpected investor that has also been on a tear in India is a lesser-known, second-generation Tiger Cub — Falcon Edge. Tiger Cubs are offshoots of Tiger Management, which was founded by Julian Robertson in 1980 and has birthed a slew of hedge-fund-style firms that have stayed true to their roots by being elusive and media-shy. (
This NYT graphic is a must read to understand Tiger and its cubs)
Falcon Edge has deployed more than $800 million to $1 billion in Indian tech startups over the past four months (January-April), said people familiar with its pace of investment.
While the exact amount it has invested across various funding rounds isn’t available, according to data provider Preqin, the fund has ploughed $1.3 billion along with co-investors across six deals this year in India. That number was $400 million for all of last year, spread between 14 companies.
What’s significant though is that the size of cheques being cut by Falcon has increased substantially amid a rush of new rounds. Along with bigger bets, the kind of companies it has been backing has changed as well, catapulting it into the top league of foreign funds in India’s thriving startup and technology sector.
Swiggy, Dream11, Policybazaar and Cred are just a few of the bunch of investments it has made.
ETtechGraphic: Rahul Awasthi
Team, investment approach, strategy
Falcon Edge was co-founded by Rick Gerson, who is based in New York, and Mumbai-born Navroz Udwadia in 2012, to back a mix of public and private market companies. Not many know that its first investment in India was JM Financial in the public markets.
Gerson, who is responsible for fundraising at Falcon Edge, began his career with a short stint at Tiger before launching a hedge fund Blue Ridge Capital in 1996. His relationship with the Middle East-based sponsors or limited partners goes back to his Blue Ridge days. Gerson is also a co-founder and board member of Abu Dhabi Catalyst Partners (ADCP) and of Alpha Wave Incubation, an early stage venture fund that has been active in India. ADCP is a joint venture between Mubadala Investment and Falcon Edge, which began life in April 2019 with committed capital of $1 billion.
In a rare media interaction, Udwadia told ET that Falcon Edge follows a very conservative barbell approach — which means it makes both low-risk and high-risk investments. “We have a dedicated early-stage fund that we manage alongside Disrupt Abu Dhabi, called Alpha Wave Incubation. It’s an approximately $400 million fund (including follow-on investments) starting from seed to Series A and Series B funding rounds in India. We try to make smaller, calibrated investments and look for outstanding founders, large addressable markets, early signposts of product market fit… and it’s higher on the risk curve.”
As for Udwadia, he is the face of Falcon Edge for local entrepreneurs. Before the Covid-19 pandemic halted business travel, he would shuttle between London and India at least eight to ten times every year, spending time in Bengaluru, Mumbai and New Delhi.
Tarun Davda, managing director at venture capital firm Matrix Partners, who has worked closely with the fund for many years, said, “Falcon Edge has a small team but they are methodical and move quickly to shape new investment opportunities. They are also rigorous in their due-diligence before deciding to invest.” Matrix and Falcon Edge boast of common portfolio companies like Ola, online news aggregator Dailyhunt, business-to-business commerce firm OfBuisness and social commerce startup DealShare.
With an investment team of around 18 professionals, split equally between public and private, Falcon continues to make investments in the capital markets, where it began in India. In the private investment team, six people work on the ground in managing India and south-east Asia.
Another investor who did not want to be named said that while Falcon was a lot like Tiger in its approach, it has a far leaner team. While Tiger works with consulting firm Bain & Company, Falcon has partnered with Praxis Global.
Udwadia, who graduated from Harvard Business School and worked at JP Morgan, Goldman Sachs and Eton Park, is supported by the likes of Utsav Mitra, an investment analyst with the firm based in London. Mitra worked with India’s ministry of power, coal and renewable energy between 2014-15 here and was a close aide to minister Piyush Goyal at the time. He was also a volunteer for Prime Minister Narendra Modi’s election campaign in 2014. For Alpha Wave Incubation, Anirudh Singh, who was earlier at Norwest Venture Partners, is a managing director based in Bengaluru.
“For India, Udwadia is running the ship as he is known to the entrepreneurial community. Gerson hardly interacts with founders directly. He usually comes on calls when the deal is almost finalised and is focussed on getting a big pool of capital,” said an entrepreneur from the fund’s portfolio.
Niren Shah, managing director at Norwest Venture Partners India, worked recently with Falcon Edge when the firm’s portfolio company Swiggy raised $800 million. Shah said, “When we brought them into Swiggy in the last round where they invested $100 million, we saw that despite the short timeline, they were careful and deliberate. They conducted a very deep analysis on not only the company and the Indian market, but also the global market.”
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ETtech Morning Dispatch: How Falcon got the edge
How did things change?
Having started its India journey with an investment in JM Financial, Falcon went on to lay bets on publicly listed firms here. On the private tech side, its maiden investment was in ride-hailing major Ola in 2014. But the fund was not among the most active in the market for the next few years.
Most people we spoke to — investors and founders in India — said Abu Dhabi’s state holding company ADQ backing Falcon as a sponsor helped it scale and snag consequential deals. AWI, for early investments, and the ADQ coffers for larger financing rounds gave Falcon the authority it needed. Abu Dhabi’s state holding company ADQ is worth $110 billion, sovereign wealth fund tracker Global SWF said, as per a Reuters report in March.
A person familiar with the goings-on at the fund said that Falcon now has a single LP or sponsor and that is Abu Dhabi’s ADQ. While they don’t have definite corpus, all growth equity deals tap into this capital. They want to be in all companies which would likely go IPO over the next 18-24 months, this person said.
“I have known Navroz (Udwadia) for many years. He was interested in investing in Policybazaar. We wanted to align with a UAE government fund as we have been operating there and would benefit from their help,” said Yashish Dahiya, co-founder and group CEO, PolicyBazaar. The online insurance aggregator recently picked up $75 million from Falcon Edge for its UAE business.
Udwadia said in our chat that he sensed a big opportunity on the growth equity side in India about 18 to 24 months ago. “We put together a deck on this almost two years ago saying there is an absence of Chinese capital. There is quietness from other major global investors. Then Covid-19 happened, which further dampened sentiment. And so we put our work on a handful of high quality names to use, and we backed a handful of top founders at a difficult time. In return we were able to enter, for the most part, at reasonable prices that made sense to us.”
While Japan’s SoftBank Vision Fund was starting to go slow due to its internal problems as portfolio firms such as WeWork imploded and Chinese FDI was under the scanner, Falcon was able to rope in Middle Eastern support. “They worked on the SoftBank Vision Fund model, albeit in a smaller way, and were able to offer the ADQ backing many Indian tech companies were looking for,” said another entrepreneur from the Facon Edge portfolio.
‘We try not to be driven by FOMO’
In April alone, India saw a deluge of freshly minted unicorns, with eight companies hitting a $1 billion or more in valuation.
ETtechUdwadia said they were able to secure deals in prized unicorns when the market was still not too hot. This was in the early part of 2020, when the nationwide lockdown stalled fundraising efforts and risk investors became extremely cautious. But Udwadia denied any aggression or super-quick deployment of funds by Falcon.
“The reason people may think we’re aggressive is because a lot of these transactions were six to 12 months in the making. We have been studying and engaging with some of these businesses for years. And they have actually come to fruition in the past several months. For every one we do, we walk away from a dozen or more!”
Sources close to the fund said that Falcon may start to slow down outside of the assets it is in the process of investing in on the growth side. On May 17, business-to-business e-commerce firm Moglix announced a $120 million fundraise paving its way into the
club, as Falcon Edge lead the financing round. But from hereon, the fund may turn cautious. “We try to always be disciplined and highly selective in what we get involved in. That hasn’t changed. We try not to be driven by a fear of missing out,” Udwadia said.
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