Alexander Tamas: the VC you've never heard of
Vy Global Growth, a SPAC worth watching
A Happy New Year to all of you!
I’m still amazed by 2020’s boom in SPACs (some $81 billion raised as of December 21 in 242 deals). Increasingly, big players are entering the game: Softbank and Thoma Bravo. Feed the ducks while they are still quacking.
Vy Capital is a venture firm founded and run by Alexander Tamas who used to be a key dealmaker at DST, Yuri Milner’s Russian venture firm (with “close links to the Kremlin”). Milner was CEO and Chairman of Mail.Ru and became a household name once DST started writing big checks to US startups, notably $200 million to Facebook in 2009 (more on DST).
After investing in the hottest startups at the time, DST’s third partner Alexander Tamas was blessed with this quote by Marc Andreessen and Ben Horowitz:
“He (Alexander Tamas) is Yuri Milner's human supercomputer. The investing whiz has placed some of the most impressive investment bets in the history of our industry, including Facebook, Zynga, Groupon and Twitter. He is a walking encyclopedia of Internet business models and strategies. He's on speed-dial for everyone trying to build the most successful, highest-scale, global Internet companies today.”
In the article they ranked him as one of the “most powerful people in tech you’ve never heard of.” To be fair, this was when DST raised eyebrows with their check size and before Softbank’s Vision Fund and VC mega funds.
According to his LinkedIn, Tamas spent 2002-2006 at a London tech investment banking boutique called Arma Partners. From 2006-2008, he was at Goldman Sachs in London, reportedly as the “co-head of internet and software coverage in EMEA for the Investment Banking Division of Goldman Sachs.” He left in 2008 to become a partner at DST. Initially this meant working at Mail.Ru for which he ran the IPO in 2010. He then worked on the Facebook deal and a string of other late stage venture investments. In 2013 he left to set up his own firm, Vy Capital.
From the SPAC’s filing:
At DST, he personally led and sourced some of the most important technology investments of that time, including leading early primary investments in Facebook, Airbnb, Spotify, Twitter, JD.com, Alibaba, Xiaomi and Zalando. He also helped to consolidate the Russian Internet sector around Mail.ru as its Managing Director and took the company public in 2010.
Since then he’s kept a low profile.
Some reading and quotes
Tamas says he believes Facebook is worth every cent of the $10 billion valuation. He says he flew to Palo Alto for his first meeting with Chief Executive Mark Zuckerberg several months ago and walked away certain Facebook would be the most important global Internet company.
"A lot of this is about Mark," he said, a grin spreading from ear to ear. "He is somebody who wants to build a real business. The mistake people are making here is to say display advertising does not work in social networking. That is true, but what does work is much more intelligent ads. It's much more like television. People have not taken advantage of what Internet as a medium can do."
“For us, it was really the theme of social networking and that was driven by us seeing the success of the companies we have in all our markets. We’re invested in five different social networks that are #1 in 13 different countries.”
“Here people seemed to be obsessed with IPOs. There are hundreds of companies that went public way too early but not that many that went public too late. You do it when it’s right for the company and not be rushed into it. The IPO really is just a step in the proper development—it’s not an exit, it’s not a new beginning. It’s just a natural evolution and I think by trying to push that too hard on a company, you more disrupt than do good.”
2010 interview: he talked about getting started in Russia and the Facebook deal. The DST team believed they had “seen the future.” Social networking had seen faster adoption in Russia and the local VKontakte network was a leading website by traffic. Their assumption was that Facebook would climb to the top of user engagement as well. This confidence in Facebook’s growth trajectory and belief it would become a dominant platform allowed them to invest at a time when markets were in a serious slump.
“All these social media sites were no. 1 or no. 2 at that time. When we looked at FB, it was still no. 12 or no. 13. At the time when we invested, it was at a significant premium to the valuation.”
“No exit money can pay for the fact that one can build something special, something significant.”
2011 Forbes on Yuri Milner:
“The day the Facebook purchase was announced, Yuri's colleague Alexander Tamas, an ex-Goldman banker, quietly approached Zynga founder Mark Pincus at a tech conference. A few months later DST Global led a $180 million venture round in the maker of FarmVille and Mafia Wars.”
2019 Berggruen Institute interview talking about social media and its impact on society and democracy. No investment insights in this video but it’s good to see he is alive and well.😉
The website doesn’t explain much. Bummer.
The name is actually interesting: “The name “Vy” is derived from aviation — it denotes the speed of the optimal rate of climb over time. It’s not the steepest angle of climb; it’s the optimal rate of climb that ultimately launches us the furthest. We believe that industry-defining technology companies exhibit the characteristics of “Vy” and that those who patiently build for the long term will be ultimately rewarded.”
Back in 2017 they still filed a form 13F for a portfolio of public tech stocks. It seems that portfolio has been wound down. Per the SPAC IPO filing they have $2 billion AUM.
Vy Capital is a global technology investment firm with more than $2 billion in assets under management with a focus on concentrated investments in category-defining technology companies with the potential to meaningfully impact humanity.
The firm has invested in a range of industries and geographies. For example, there’s Reddit, Elon Musk’s Boring Company, India’s Zomato in 2015 (seems to be doing well), Upgrade Renaud Laplanche’s second act, Coalition (cyber insurance, also just raised again), and India’s UrbanClap (a gig marketplace now called Urban Company), ecommerce at OfferUp, and quantum computing at Rigetti.
Tamas is also involved in a few healthcare initiatives: “Alexander Tamas Fellowship at the Future of Humanity Institute at Oxford, a neuroscience research institute at Imperial College, and, together with Mr. Hering, Mr. Tamas helped to form a biosafety initiative in partnership with UCSF and CZ BioHub.”
If we think about VC firms as belonging in one of three buckets - investing in either people, product/technology, or markets - Vy Global seems to fit into the people bucket (this is from the letter in the IPO filing): “We are builders and founders supporting builders and founders. At Vy Global Growth we are motivated by the desire to support exceptional mission-driven founders who have the ambition to build for the long term.”
Chairman: Alexander Tamas
CEO: John Hering of Vy Capital. Co-founder of two cyber security companies: Lookout (founder and CEO until 2014), and Coalition (cyber security insurance). “Coalition is backed by over $100 million in venture capital from leading investors including Hillhouse Capital, Ribbit Capital, and Vy Capital.”
Hugo Barra: Google, Xiami, Facebook VR/Oculus
Julie Hereden: CMO at PagerDuty, Uber, Dropbox, Yahoo
Steve Huffman, co-founder and CEO of Reddit
Sujay Jaswa: co-founder of WndrCo, a consumer tech holding company that I don’t know much about. Previously at Dropbox and New Enterprise Associates
Justin Kan: Justin.tv which became Twitch
Javier Olivan: VP at Facebook which he joined in 2007. Was a director at MELI
This looks pretty credible to me.
Anyway, that’s what I’ve been able to find so far (email/dm me if you happen to know more). Like I said, Tamas and Vy have been keeping a pretty low profile.
And that sums up the idea: a SPAC with an experienced sponsor and strong board trading at a small premium. I consider the global focus a plus. Too many people in the US competing for deals..
Other SPACs backed by quality sponsors can trade at a decent premium before deal announcement, at least in this market environment (see: Ackman’s PSTH, Peter Thiel’s BTWN, Dragoneer’s DGNR and DGNS, Altimeter’s AGC, Och/Fuhrmann’s AJAX). Lux’s LUXA is another sleeper at a small premium.
So the downside is limited and the upside is an interesting deal. Either as a “trading sardine,” where one can sell into the deal announcement. Or, if it’s a really compelling idea, as a long-term investment despite the dilution.
Disclaimer: this is not investment advice and not a recommendation to buy or sell any of the securities mentioned. Always do your own research before making an investment. Please manage your portfolio and position sizing in accordance with your own risk tolerance and investment objectives. I may own, buy or sell any of the securities mentioned.
Also, I recommend a healthy dose of skepticism for all SPACs. Unfortunately the deck is stacked against retail shareholders. This recent paper highlights the cost borne by investors:
Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each outstanding share. We find, first, that for a large majority of SPACs, post-merger share prices fall, and second, that these price drops are highly correlated with the extent of dilution, or cash shortfall, in a SPAC. This implies that SPAC investors are bearing the cost of the dilution built into the SPAC structure, and in effect subsidizing the companies they bring public.