The Generalist - Coatue: An Agile Colossus

Hey friends,

Ever since I shared a piece on Tiger Global, I’ve received requests to cover fellow crossover fund Coatue Management.

Like their (slightly) larger rivals, they’ve made a huge splash moving from the public to private markets. In less than a decade, Coatue has become a formidable competitor in the venture capital ecosystem, investing in big name startups like OpenSea, Snap, Lyft, Meituan, Instacart, Chime, Marqeta, and many others.

They’ve done so by executing a fundamentally different playbook built around in-house research, data analysis, and an impressive network. Though that is worthy of recognition, that success does seem to have come at the expense of internal harmony. To jump straight into the fascinating history, development, and strategies of Coatue, just hit the button below.

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COATUE: AN AGILE COLOSSUS

Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Coatue.

• Coatue ≠ Tiger. Though they are frequently compared, the two mammoth crossover funds run very different playbooks. Tiger looks to index the private markets and relies on outsourced diligence. Coatue is a more selective picker and leans on its internal research abilities.
• Large organizations can still evolve. Though Coatue is one the biggest funds in the world, it has continued to experiment with its structure. Almost a quarter of a century into its lifecycle, the fund shows no signs of curbing its adventurousness.
• Data science offers an edge in private markets. In 2014, Coatue began investing in data science capabilities. In the years since, it has built a robust platform called "Mosaic" that surfaces credit card data, customer lists, and company comparisons. Though some question its utility, it is favorably received by founders.
• A global outlook can surface new lessons. Coatue was quick to recognize the potential of investing in Chinese tech. It has applied lessons from that geography to Western businesses and visa-versa. Coatue founded a splashy conference to facilitate cross-cultural exchange: "East Meets West."
• Hedge fund norms are an uneasy fit with VC. Though it has a fully-fledged private market practice, Coatue's internal culture has been lifted from Wall Street, circa 1985. It is notoriously cutthroat and aggressive. The compensation structure is also non-standard and may partially explain critical departures.

Size usually comes at the expense of agility. The elephant can't match the mouse's darting run; an eighteen-wheeler does not corner like a golf buggy — no tugboat turns on a dime.

Coatue is an unusual colossus. Since Philippe Laffont founded the firm in 1999 with just $15 million, the crossover fund has expanded to a size that puts it among the giants of the financial world. One source I spoke with suggested its assets under management may now reach as high as $90 billion.

Yet, as it has grown, Coatue has seemed to lose none of its nimbleness. On the contrary, increased size appears to have bred greater agility, not less. An organization that began life as a long-short hedge fund has spent much of the last decade spinning up new investing practices. Most notably, that has occurred in the private markets with a now-thriving growth stage strategy alongside carve-outs in fintech, climate tech, and beyond. Not all of its experiments have succeeded—a high-profile internal investment in a new quant strategy flamed out spectacularly. But the fact that a firm of Coatue's scale is willing to move, to experiment, to try, is the core of what makes Coatue special.

Another strange juxtaposition is the firm's clearest vulnerability. While Coatue has charmed entrepreneurs with its fast decision-making, friendly terms, and impressive data science capabilities, it may have done so while neglecting its internal culture. To an unusual extent, sources I spoke with highlighted the firm's high churn, aggressive atmosphere, and corrosive managerial practices. All those who shared their experiences — a group that included former employees, co-investors, and portfolio founders — asked to remain anonymous. In one case, that was explicitly motivated by fear of reprisal. "Coatue can have some vengeance," a former employee said.

Such issues may not matter, at least when it comes to returns. Cultural unrest has not stopped the firm from becoming a global standout. Still, strong talent continues to depart, and while Coatue will believe it can continue to attract gifted employees, humans are peskily non-fungible. Coatue may need to remedy its internal frailties to secure an enduring, positive legacy.

In today's piece, we'll touch on the juxtapositions at the heart of Coatue. In the process, we'll explore:

• Philippe Laffont's investing path. Coatue's founder didn't intend to be a stockpicker. His passion for technology transformed into a gift for picking the sector's best businesses.
• Coatue's continuous evolution. What started life as a public market vehicle developed into a true "crossover." Coatue has become a powerful player in venture capital in the last decade.
• How the fund makes decisions. Philippe Laffont may be the ultimate decision-maker, but several other power players influence how investments are made at the firm.
• What weapons Coatue uses to win. Continued spending on internal data science tooling has paid off. Coatue's platform, dubbed "Mosaic," impresses potential portfolio founders and helps guide decision-making.
• The firm's cultural flaws. Coatue has created a high-performance environment but has done so by governing with fear and aggression. That's contributed to high levels of organizational churn, even among senior investors.
• Reasons for optimism. The fund's foundation allows it to execute across asset classes and sectors. Given the technical capabilities it boasts, Coatue seems particularly well-placed to further its presence in crypto.

Let's begin.

IN A MEME
​​For the pictorially inclined, here's the whole piece — all 8,800 words of it — in a single meme.

PUZZLER
​​All guesses are welcome and clues given to anyone that would like one. Just respond to this email for a hint.

They say that Time waits for no one. That was particularly true of Steven R, who succeeded in responding to last week’s puzzler with impressive alacrity. He was joined in the winner’s circle by fellow detectives Eli G, Sai P.R., Thomas K, Neil B, Greg F, Dan M, Lauren B, Anastasia B, Timothy B, Sean S, Shaw C, Sharon W, Nanda N, Bret M, Sharon L, Shane P, Anthony F, Kenneth C, Nicole E, Sudarshan P, Patrick A, Robert H, l, Karanveer M, Uri S, Alexandre P, Jeremy S, Ankur J, Mateo B.P., Wayne A, Paul M, Storm D, Maksimjeet C, Massimiliano B, Jonathan W, John G, and Joseph R. All found a good response to our prior riddle:

The answer? On a clock, of course. Another good answer was on a calendar — adding three months to November takes you to February, the year’s second month.

As a small note, we’ll be taking a brief break next weekend. I’m in the middle of researching a story I’m very excited about and think I might need a bit of extra time to bring it to life. I don’t expect this to happen often, but every once in a while, I think it’s worth making an exception. I can’t wait to share more 😊
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Until next time,

Mario