Some of Seattle’s hottest startups are taking big checks from a major investment firm that rarely bets on private companies. But if you haven’t heard the name Lone Pine Capital, you’re not alone.
The Greenwich, Conn.-based firm recently led a $114 million investment in sales automation startup Outreach and last year participated in a $185 million round for on-demand trucking startup Convoy. In each case, Lone Pine helped to create a new unicorn, pushing the companies’ valuations north of $1 billion.
Lone Pine is notoriously quiet and declined to comment for this article, citing a “no press policy.” The Outreach press release announcing the investment described the firm as “a private investment management company that manages three hedge funds, three long-only funds and a fund of funds. The funds have approximately $20 billion under management and consist of over 800 investors, predominantly individuals and non-profit organizations.”
What makes the investments in Convoy and Outreach remarkable is the fact that Lone Pine rarely invests in private companies. In the past decade, Lone Pine has only revealed stakes in seven private companies, and four of them — Chinese carmaker NIO, e-commerce pet supply store Chewy, Uber and Snap — have since gone public or plan to go public soon.
Outreach CEO Manny Medina told GeekWire that neither he nor most of his investors had heard of Lone Pine before the recent fundraising round. Despite that, Medina said that the hedge fund’s representatives “blew us away” from the start. Investors typically only have a faint understanding of the company during an initial meeting, but that wasn’t the case with Lone Pine.
“Lone Pine did all the research up front and they came back to us and told us why we are going to be the next Bloomberg for sales,” he said, referring to the financial terminal used by many investors. “They came with that thesis to us, saying, ‘I want to invest in this business; what do we need to do to make this happen?'”
Medina was also impressed by the fund’s track record. “They make very few investments, but they put a lot of money into each of those investments. And they have been incredibly successful,” he said.
Lone Pine has a long history of winning bets. LCH Investments, which ranks hedge funds, estimated that Lone Pine has taken in $26 billion in profits since the fund launched in 1997.
Stephen Mandel, Jr. launched Lone Pine after starting his career with investor Julian Robertson’s hedge fund Tiger Management — making him part of the class of “Tiger Cubs” who left to start their own investment ventures.
Mandel has since been hailed as “the best long-short hedge-fund manager of his generation” by Seth Klarman, CEO of the Baupost Group, another hedge fund. According to Forbes, Mandel is worth $2.4 billion and comes in at number 962 on its list of the richest people in the world.
We know much more about Lone Pine’s public company holdings, which show a healthy appetite for both tech and Seattle firms. Lone Pine owns more than $1 billion in stock in Amazon, Microsoft and Adobe, which collectively make up nearly a quarter of the fund’s total holdings. It’s also the largest shareholder in Paypal and owns $890 million worth of Facebook and nearly $900 million of IQVIA stock, according to regulatory filings.
Lone Pine has a reputation for investing in business fundamentals, but that hasn’t stopped it from embracing tech companies with pricey valuations but high potential for growth. The fund follows a long-short strategy, which involves both buying stocks it thinks will rise and selling short those it expects to fall.
It isn’t exactly rare for a hedge fund to take stakes in private companies, particularly late-stage ones. In the Seattle area, Chase Coleman’s Tiger Global Management, another successor to Robertson’s Tiger Management, has been gobbling up stakes in private companies left and right.
Tiger Global recently led a $28 million round in Karat, a platform for hiring technical roles. It also co-led a $43 million funding round in warehousing’ startup Flexe and spearheaded a $50 million round in spa and salon software startup Zenoti. The short list of Tiger’s other Seattle-area bets includes marketing startup Amperity; publicly-traded real estate giant Redfin; and OfferUp, a Craigslist competitor valued at more than $1 billion.
Tech bets have paid off for funds like Tiger Global, which reportedly made $3 billion off of a single investment in Indian e-commerce company Flipkart.
The appetite for Seattle-area tech startups might be signs of a new era for Lone Pine. Mandel stepped down from running firm’s day-to-day operations at the start of the year, passing the managerial reins to deputies David Craver, Mala Goankar and Kelly Granat. The firm doesn’t have any obvious connections to Seattle apart from its investments.
Earlier this week, Lone Pine announced yet another private company investment, participating in a funding round for New York-based luggage manufacturer Away.
One thing is certain: Lone Pine is looking for big paydays from its bets. In the firm’s own rare words, from the Outreach news release announcing its funding round: “[Outreach] sits in a category of untapped market potential with an opportunity for high growth.”
Nat Levy contributed additional reporting to this article.