Coatue management is set to roll out a $300 million fund to invest in high-growth, pre IPO start-ups. Top line executive of the management, Thomas Laffont, is behind the efforts to manage the fund from an office in Menlo Park, next to Andreessen Horowitz Partners in the Rosewood complex on Sand Hill Road.
Coatue management can also invest up to 10 percent of the existing capital in private companies, which implies that it has up to $1 billion to invest in private tech companies.
Coatue, a ‘Tiger cub’ is ranked amongst the top ten hedge funds by Bloomberg. It was created by Philippe Laffont along with his brother in 1999. Coatue management bet heavily on Apple Inc. (NASDAQ:AAPL) in 2003, but it is also acknowledged for placing bets on smaller tech companies like Equinix Inc (NASDAQ:EQIX) and Virgin Media Inc. (NASDAQ:VMED).
In November, the hedge fund bought 12.7 million shares of News Corp (NASDAQ:NWSA) (NASDAQ:NWS) for $312 million and invested about $196.4 million in Time Warner Cable Inc (NYSE:TWC). Coatue also acquired 3.3 million shares of Time Warner Inc. (NYSE:TWX) for $152.5 million.
Laffont, before investing money in any company, orders a deep research into it by his massive research staff. Laffont, after due research, arrives at a valuation based on fundamentals and also the valuation of Wall Street for the company.
“The Valley does a lot of things well but there is no better instrument for setting price than the public markets,” Laffont said in an exclusive sit down with PandoDaily about the new fund.
Coatue is presenting its offers to pre-IPO companies, which are significantly different from others. The term sheet, according to Laffont, will be as simple as one sheet describing what number of shares are bought by them at what price. Coatue will not pay more for the shares based on momentum, buzz, froth, or the desire to put a logo on the website
Apart from Coatue, there have been other big firms like Tiger Global, T. Rowe Price Group, Inc. (NASDAQ:TROW), and Fidelity, which are active in the market. However, if Laffont is correct, Coatue marks the difference and can move in a higher momentum than any of these, because it is a fund solely focussed on technology.
Coatue, in contrast to other venture funds, is the first to draw down the fund of $300 million on day one, which is already in the public market earning returns. In order to invest in the private company, the fund is drawn out from the public markets. The fee earned is same in both ways and additionally there is no pressure to “put money to work”.
Presently, it is impossible to predict the success of Coatue in the venture market. It could put funds up to $1 billion over the next three years and the other scenario could be that it invests nothing if the deals are not at right place.