Coatue is like a financial building, showing the heart of a master craftsman and the instinct of an artist.
This article comes from readthegeneralist , the original author | Mario Gabriele, founder and editor-in-chief of The Generalist
Translator | Moni
Produced | Odaily Planet Daily (ID: o-daily)
No matter in the traditional investment field or the emerging encryption investment industry, almost no one does not know Coatue Management.
A $300 million round in NFT marketplace OpenSea, a $17 million Series A round for payments company Silverflow, a $100 million round for Web 3 talent network Braintrust, a $300 million round for Niantic, the AR company behind Pokémon, and fintech companies Coatue played the role of lead investor in Upgrade's $280 million financing transaction. Today, let us take an in-depth look at this investment giant.
The 'hermit' who turned from computing to investing
In financial history, many financial companies were founded by brothers: Lehman Brothers, Salomon Brothers, Lazard Brothers, Harriman Brothers and Brown Brothers, etc., they have all become myths on Wall Street. Although Coatue Management is run by brothers Philippe and Thomas Laffont, it is not named after them.
Brothers Philippe and Thomas Laffont were born in Belgium and spent most of their youth in France. Philippe Laffont, who was two years older than Thomas Laffont, described himself as a recluse, especially in his teens. He said:
"When I was sixteen, I was very nerdy, and my parents wouldn't let me go out."
However, Philippe Laffont is not idle, and all his free time is used to study his obsessed computer technology. As it turned out, an interest in computing helped him—he successfully applied to MIT in 1985. The following year, Thomas Laffont followed his older brother to the United States to complete his high school studies at the French School in New York. Philippe Laffont has a master's degree in computer science from the Massachusetts Institute of Technology, and worked at McKinsey's Madrid office after graduation. It is worth mentioning that before joining McKinsey, he applied for Apple three times, but was unsuccessful. For Philippe Laffont, one advantage of working in Spain is that he can spend time with his wife, Ana Isabel Díz de Rivera, a lawyer whose family is influential in Spain.
Two years later, Philippe Laffont's contract at McKinsey was about to expire and he was about to return to the United States, but his wife, Anna, wanted to stay home. In the end they reached a compromise and Philippe Laffont decided to join Anna's family business for a year. Looking back on this experience, it was actually very important to him. However, at the time, Philippe Laffont was very depressed because he was assigned to the office and had nothing to do overall. In order to pass the time, he began to read the "Herald Tribune" every day.
Soon, Philippe Laffont developed a keen interest in stocks. He watches the market by reading the Herald Tribune every day. Soon after, he started to try his hand at a small scale, picking some blue-chip technology companies he was optimistic about to invest in. Philippe Laffont's early portfolio included Microsoft, Intel and Dell. Although Thomas Laffont was in California at the time, he was also involved in the investment, and the two fraternities often discussed investment ideas.
In the mid-1990s, tech companies like Microsoft began to appreciate dramatically, which gave the brothers confidence. Even Philippe Laffont himself began to wonder whether it was their luck or their investment skills. He once said that if this golden age hadn't happened, the two brothers "would have given up investing and turned to other things. .”
Get a job at Tiger Global Fund in 2 minutes
After a year in the office, Philippe Laffont and Anna moved to the United States, but instead of working in Silicon Valley, Philippe Laffont chose to work on Wall Street. He first took an unpaid position at a mutual fund company. But it didn't take long for him to get a promotion. At a conference, Philippe Laffont met Julian Robertson, founder of the hedge fund firm Tiger Global Partners.
Like his initial job application experience at Apple, Philippe Laffont was rejected at the beginning. In view of his study experience at MIT, his resume was automatically sent to the IT department of Tiger Global Fund, but the other party said "there is no vacancy." He was rejected on the grounds of "job". Thankfully, however, another door opened for him. As Philippe Laffont recalls, Julian Robertson gave him a chance when he had two minutes to fight for himself and told Julian Robertson very bluntly that he wanted a job picking tech stocks for Tiger Global Fund. Worked and impressed Julian Robertson very much during the interview. So Julian Robertson introduced him to his technical team. Ultimately, Philippe Laffont passed their screening for a position at this legendary company.
Soon, Philippe Laffont decided to go it alone. In 1999, he founded Coatue Management.
I once applied for Apple and was rejected, and I made a lot of money by investing in Apple
Very similar to Julian Robertson's experience, Philippe Laffont has gradually built his financial empire from the beginning alone. Coatue Management started with $15 million in assets under management (AUM) in 1999 , but now has between $70 billion and $90 billion in assets under management.
Philippe Laffont, like his mentor Robertson, operates very simply: buy the best companies and short the worst. Moreover, Philippe Laffont is particularly concerned about the new generation of "consumer technology companies". While many peers only focus on the short-term trend of the company, Philippe Laffont focuses on finding companies with sustainable development. He believes that patience and long-term consideration are his advantages.
Just in December 1999, when Coatue was first established, the Nasdaq Composite Index was stuck at 4,000 points. By March 2000, the index hit 5,000. Then, the bubble burst.
The bursting of the dot-com bubble triggered a crash in tech stocks. By the end of 2002, the Nasdaq Composite was hovering above 1,200. The first three years of Coatue's founding happened to catch up with a market decline of more than 75%. However, it is worth mentioning that Philippe Laffont has withstood the storm, showing his ability to manage under adversity and attracting more investors.
The following year, Thomas Laffont also joined Coatue. Since finishing high school, he has followed a very different path. After graduating from Yale, Thomas Laffont moved to CAA Beverly Hills, California, and worked his way up the ranks. During his six years at the agency, he worked for talent agent Bryan Lourd, whose clients included George Clooney, Ryan Gosling, Scarlett Johansson, Paul Thomas Anderson and Lady Gaga. Although Thomas Laffont became a broker himself, nothing beats running a fine investment firm with his brother.
Like Tiger Global's Scott Shleifer, Coatue is very bullish on Chinese tech companies. In 2004, Coatue invested in Tencent at the IPO price. At that time, the market valued Tencent at less than US$1 billion. Today, however, Tencent's market capitalization has reached $590 billion.
Another key Coatue investment was in Apple. A Coatue employee pointed out, "Philippe Laffont may have made more money at Apple than anyone else." Recalling the experience of being rejected for a job at Apple, Philippe Laffont was deeply moved, and now he has obtained what he wanted in another way. something you want.
Coatue's investment "playbook"
By analyzing Coatue's investment strategy, we can understand how they source, evaluate, win and support investment deals.
1. Look for investment targets
Unlike Tiger Global, Coatue appears not to want to index the private tech sector, but instead looks for investments that fit into one or more "macro trends." A source close to the company highlighted a few examples of areas of investment that Coatue is focusing on, such as:
New business models emerging through Web 3;
The emerging maker economy;
Tools to bring traditional offline business online;
food delivery revolution;
E-commerce enables...
Looking at Coatue's investments over the past few years, we can see how the portfolio maps to these megatrends, as shown in the chart below:
Of course, some of these startups may fall into more than one sector category, but regardless, Coatue knows what they're looking for better than many other funds.
2. Evaluate investment targets
In most cases, Coatue evaluates investment targets internally, which is very different from Tiger Global Fund. Tiger Global is known to outsource much of its valuation and research to Bain & Company, freeing up investing time to focus on capital allocation.
A source pointed out that Coatue is very concerned about the total addressable market (TAM), and will also dig into the details. For example, when analyzing a business like Datadog, Coatue doesn't just look at the market for cloud monitoring software, but also carefully analyzes product attach rates for similar products and examines how departmental budgets are deployed—very differently than other investment firms.
3. Win investment deals
Coatue has some "weapons" when fighting for investment deals, the most important are the following four:
Get unique data analysis through Mosaic;
Influential connections;
Amazing publicity;
Flexible pricing.
4. Support the invested enterprises
After winning the investment, Coatue's participation does not end. Tiger Global Fund usually does not interfere with the companies they invest in, but Coatue hopes to strike a balance between active support and freedom. They will occupy seats on the board of directors of the investment target company, And seen as a dedicated, founder-friendly contributor. A Coatue portfolio founder said Coatue strikes a good balance of being helpful without being nosy. In addition to participating in governance, Coatue leverages its data capabilities to support its portfolio. Philippe Laffont is also well-connected, with one source citing the company's partnership with investor social network CommonStock as an example. After leading Series A, Philippe Laffont reportedly sent a message to dozens of billionaire investors in a WhatsApp group telling them about the CommonStock service.
"Horrible" corporate culture
When researching Coatue, one issue came up repeatedly and couldn't be ignored: an aggressive internal culture. For all the good things that have been said about Coatue's team and leadership -- and we'll talk about that -- it seems like the investment house has a number of management issues, starting at the top.
1. Leadership
There are three people at the top of Coatue, Philippe Laffont, Thomas Laffont and Daniel Senft, and in some ways each individual's character is reflected in the organization they have built.
Such was the case with Coatue's founder, Philippe Laffont, who, as his educational background suggests, had an innate talent for numbers, analyzing and recalling massive data sets with chilling skill. A source said:
"He remembers every number you give him, even if you gave him five years ago."
Not only that, what Philippe Laffont is really good at is creating and seizing the best investment opportunities in his career. For example, he will double down on breakthrough hot products such as Apple, Tencent and ByteDance, and he knows where time to retreat.
Thomas Laffont, by contrast, was the more amiable of the two and was described by some as "very charming". Perhaps because of this, Thomas Laffont, who has managed to build an impressive network and attract the likes of Snap and Spotify, is often a big-picture thinker, sometimes adept at playing the devil's advocate and sometimes poking at consensus opinions. hole.
However, despite having a higher emotional intelligence than Philippe Laffont, Thomas Laffont can still have a bad temper at times, with one source describing both Laffonts as "very scary".
In addition to these three, Coatue has several other key players, including the company's private markets team, which seems to have received a lot of praise, especially by external parties. One of the portfolio founders specifically praised Matt Mazzeo, who has incredible product thinking and is one of the best talents in the world in the field, for his positive contributions to the business; another was Caryn Marooney, a She is very important to portfolio company Notion, and Caryn Marooney's experience as vice president of communications at Facebook made it particularly easy for her to find the best investment targets in the information management industry, according to a source.
2. Aggressive management style
As mentioned above, some of Coatue's leaders have earned solid reputations. Overall, however, the company seems to allow an aggressive, dense corporate culture.
Perhaps, it's in Coatue's DNA.
Philippe Laffont is not like an investor of this era, he may have experienced an arrogant management style, and in a previous interview, he almost gleefully talked about the "hormones" of life on Wall Street. There is no doubt that Philippe Laffont is a man who thrives in a competitive environment. In fact, the intensity of Coatue's work can be understood from the character of Philippe Laffont - there is no success without sweat, and the best teams often need to work very hard.
“A lot of people were called out in public … and it happened a lot, and it was really awkward,” recalls one former employee, recalling their time at the company. Thomas Laffont sometimes used Zoom before criticizing employees. Calling out subordinates, a situation that leaves some employees with a lingering bad impression. “Every time I hear that Zoom ringtone, my heart starts to beat,” the source said.
Coatue lost many talented investors, and those who stayed didn't seem to get better opportunities to develop.
"Coatue doesn't have a mentorship program," one source said. This management model feels particularly disappointing given Philippe Laffont's history with Tiger Global.
Of course, for many people, access to investment opportunities is worth it. While Thomas Laffont can relentlessly criticize employees on Zoom calls, he offers a great investment opportunity. Thomas Laffont said: "I am still full of positive energy ... and also tell entrepreneurs where to make money."
dare to experiment
While there are elements of Coatue's culture that could be improved upon, one aspect is almost entirely admirable: their willingness to try new territory. In this respect, Philippe Laffont has opted for a startup-like model, unlike many investment institutions. Traditional asset management firms are often "pedantic" and uninspired, but Coatue has innovated, and a former employee commented persuasively: "One thing that people may not notice is that Coatue is very daring to try and experiment, and this does not seem to be too much. Lots of attention and not enough praise.
Perhaps in the next few years, this DNA will help Coatue, although more and more people think that Coatue will become Tiger Global Fund, but this is not the case, we may see them create a set of "theme ETF" thing, across the private investment market and the public investment market. Today, we've seen Coatue launch SPVs in focus areas like fintech and climate, so why can't they do the same for crypto, healthcare and enterprise software?
The cryptocurrency industry is a huge opportunity to invest in, and through a series of successful bets, Coatue has established itself in the crypto ecosystem and made a huge impact. The crypto industry has a wealth of publicly available data, but few products that provide valuable analysis. Also, having experience trading public assets may help Coatue when managing tokens, although the markets are very different.
Unfortunately, people who have participated in many crypto investments have now left Coatue, such as Kris Frederickson, Matthew Mizbani, who is still active in the crypto industry and has become a partner of Paradigm Capital. Others who left Coatue are shown in the figure below Show:
As it stands, Coatue may need to staff some staff and provide a better environment and compensation for talent, however, Coatue has done an excellent job of reshaping and reinventing itself in the market to accommodate innovation.
Summarize
"Largeness" and "Greatness" don't sound like synonyms, but Coatue sometimes feels like it's trying to bring the two words together—yes, Coatue is big, but it also wants " achieve greatness."
In almost every aspect of the investing world, Coatue's track record is solid. Few investment institutions have been able to construct such a complex portfolio of attributes. A pre-eminent hedge fund has spawned a growth investing practice while using strong data science capabilities to bring together various portfolios so they work together. and thinking. Taken as a whole, Coatue resembles a financial building that embodies the heart of a master craftsman and the instinct of an artist. Regardless, Coatue is doing a great job, as evidenced by every investment deal they win.
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