From Dan Loeb’s Q3 letter to investors.
Private Investments
For two decades, as part of a broader private security investment strategy, we have made
numerous multi-stage private investments through Third Point Ventures (“TPV”), led by
Robert Schwartz out of our Menlo Park office. TPV has carved out a niche investing in
companies with exceptional management teams with sustainable technical and IP
advantages in areas that draw on Rob and his team’s expertise in Enterprise Software, IT and
Networks-related technology, cybersecurity, data analytics, cloud/edge infrastructure,
financial technology, mobility and e-commerce.
We plan to launch a dedicated venture fund during the fourth quarter (“TPVC”) to capitalize
on our record, proven expertise, and generational opportunities in the space. Two of our
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investments, Upstart and SentinelOne – companies where Rob sits on the Board and where
we were major early investors – have experienced rapid growth, appreciation in value, and
we believe they have a clear path to monetization. We are also holding an impressive “farm
team” of earlier stage investments including Yellowbrick Data, Aryaka, Kentik, Kumu
Networks, and a recently completed Series B in Ushur that show great promise.
We are at a compelling moment to deploy dedicated capital given the acceleration in
technological innovation. Today, we are ideally situated with a purview of both public and
private markets, a long track record, a strong reputation in helping build businesses, and the
rationalization of valuations in the private space. While COVID-19 pulled forward and
solidified technological changes such as distributed workforce, enterprise cloud adoption,
shift to on-line, and resultant cybersecurity attack surface expansion, valuation momentum
peaked in 4Q 2019 and is now rationalizing. By its nature, venture capital investing is long-
only, illiquid, and long duration. The best opportunities to invest tend to be counter-cyclical
and having the right capital gives us a tactical advantage. We believe dedicated assets will
allow us to optimize position size and take advantage of investment opportunity with greater
agility at a time when deal flow is extremely attractive.
The new opportunity set we are seeing is driven by transitions within segments comprising
our bedrock DNA investing in enterprise, cybersecurity, and infrastructure. We expect to
deploy our considerable experience investing in software businesses enabled by artificial
intelligence and machine learning, as well as supporting technology infrastructure. We will
seek to invest thematically in companies that enable or secure the evolving digital
enterprise. The digital enterprise generates massive data, which at scale fuels machine
learning, and modern artificial intelligence, which in turn drives automation that creates
expansive economic value that drives the opportunity for young companies and their
investors. This enterprise data “flywheel” offers excellent fresh investing opportunities for
us to pursue with dedicated capital.
TPV-Tech2 has made 34 tech investments since 2000, with 11 exited via profitable M&A/IPO
and 12 still active in the current portfolio. We have funded four companies at Series B that
have become Unicorns (i.e. valuations in excess of $1 billion). Information about all of
our Ventures investments may be found here. Since our first venture investment in
2000, we have refined our focus, sourcing, process, selection, and post-investment value-
add so that our most modern vintage (the 2015 vintage) sets the stage and defines the
strategy for the new dedicated fund. Going forward, while we may make some later stage
investments, we prefer Series B expansion stage opportunities where we take an active
approach in building the company and hold a board seat. These investments represent
the optimal intersection between our skill set, attractive valuations, and risk/reward
profiles. Since 2015, when we refined this TPV-Tech investment approach, our success
ratio (fraction of investments worth more than their value at initiation) has been ~75%
(compared to ~54% over the entire twenty years). According to Pitchbook data, TPV-
Tech’s 2015 vintage investments have generated returns that place us in the top decile of
2015 venture funds.
TPV also provides an important source of differentiated value for Third Point’s main
funds: insights into emerging technology that inform our public investments across
multiple sectors, enabling us to invest across a company’s life cycle. TPV is integrated
into the TP research discussion and provides useful color in TMT, Consumer, Energy,
Industrials, and Financials.
We look forward to growing this part of our business and hope that many investors will take
an interest in this new product.
Two examples of core positions driving our current performance are SentinelOne
and Upstart, which we discuss in more detail below.
2 TPV-Tech represents Third Point Ventures Technology investments.
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SentinelOne
SentinelOne is an Israel-originated cybersecurity firm formed in 2013. Now headquartered
in Mountain View, CA, the company provides next generation AI-powered endpoint
cybersecurity for the enterprise market. Within the $100 billion worldwide security market,
endpoint security represents a rapidly growing $15 billion+ segment. SentinelOne serves
over 8,000 clients (including AT&T, Exxon, McKesson, and other Global 50 Enterprises) and
competes with providers such as CrowdStrike, Symantec, and McAfee. The company is
growing ARR over 110% YoY. We found SentinelOne via our network in CyberSecurity in
Tel Aviv after our outreach to all next gen endpoint security vendors. Rob Schwartz joined
the Board when Third Point Ventures led Series B for SentinelOne at $97mm valuation in
October of 2015. They recently signed a term sheet at $3 billion valuation (30X our entry
point) for a substantial raise (with Third Point participating) which is expected to close at
the end of October and should take the company to a possible IPO in the next 12-18 months.
Third Point owns approximately 10% of the company.
Upstart
Upstart is an advanced, AI-driven, non-bank lender launched in Palo Alto, CA in 2012 that
provides unsecured consumer loans and refinanced auto loans using non-traditional
underwriting variables to predict creditworthiness. Founded by ex-Googlers, Upstart is
known for its ability to price risk via its superior AI-driven modeling capability. The
performance of their lending versus AI-powered model predictions over the last seven years
is among the best in the industry. Upstart partners with traditional banks and, critically,
does not use its own balance sheet. As an example of the collaboration between TPV and
our main funds, our structured credit team has been instrumental in evaluating Upstart’s
loan and securitization products.
TPV led the Upstart Series C in 2015 at a $145 million valuation and Rob joined the
company’s board. Rob has assisted the company with management strategy, tech focus, and
organizational development, while Third Point Credit has helped the company refine its
Capital Markets approach as they began to scale. In December 2016, Rakuten led Series C-1 at $200 million valuation, and in December 2018, Progressive Insurance led the Series D at
$650 million valuation. TPV currently owns just under 15% of the company.
……………
Business Updates
As discussed above, we have hired eight new investment professionals, deepening our
expertise in event-driven investing and furthering our specialized sector coverage in the
consumer, healthcare, and industrials sectors, as well as adding geographic specialization in
China. We also added a new data science specialist, and ventures professional. Their
biographies are below:
PAUL CHOI: Paul joined the data science team as a Quantitative Data Analyst. Previously, he
was a Data Lead and Research Analyst at Point72 Asset Management. Paul also has prior
experience working for a fintech startup, YipitData, and in equity research at UBS Investment
Bank and Morningstar. He graduated magna cum laude from DePaul University with a B.S. in
Finance.
JIGAR CHOKSEY: Jigar joined the investment team with a focus on healthcare. Prior to Third
Point, Jigar spent three years at Highline Capital Management as a Healthcare Analyst. Before
joining Highline, he worked at Magnetar Capital covering healthcare. Previously, Jigar was
an M&A and Restructuring Associate at Evercore Partners and began his career as a
management consultant at Booz & Company. He graduated magna cum laude from
Northwestern University with a B.S. in Biomedical Engineering and Economics and an M.B.A.
from the Wharton School at the University of Pennsylvania.
TAYLOR COPUS: Taylor joined the investment team with a focus on industrials. Previously,
he was an Analyst at Nokota Management investing in cyclicals and industrial tech. Prior to
Nokota, he worked as an analyst at Highbridge Capital Management and as an investment
banker in the Industrials and Natural Resources group at Goldman Sachs. He graduated cum
laude from Princeton University with a B.A in Economics and a Certificate in Finance.
TIMOTHY LIU: Tim joined the investment team with a focus on covering China and Asian-
investments with a primary focus on consumer and internet. Prior to Third Point, he spent
eight years at Scopia Capital, a long/short equity fund, where he focused on China and
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consumer investments. He graduated summa cum laude from the University of Pennsylvania
with a B.S. in Economics from the Wharton School.
GREGORY MERVINE: Greg joined the investment team with a focus on consumer. Previously,
he was the consumer sector lead at EMS Capital. Prior to EMS, he worked as a Senior Analyst
in the consumer group of Maverick Capital and worked in growth equity and venture capital
at Bain Capital Ventures. Greg started his career at Bain & Company. He has a B.A. from
Washington University in St. Louis and an M.B.A. from Harvard Business School.
DAN MOSKOWITZ: Dan joins Third Point’s Ventures later this month and was previously a
Manager in Venture Capital and Corporate Development at Cisco Systems concentrating on
cybersecurity and other investments across the enterprise stack including infrastructure,
networking, data, developer tools, and applications. Prior to that, Dan held a summer job at
Unity Technologies, and interned at Glasswing Ventures and Touchdown Ventures,
concentrating on artificial intelligence and machine learning. For the previous five years, Dan
was a Software Engineer and Program Manager at Lockheed Martin. Dan holds an MBA from
Harvard Business School, a MS in Systems Engineering from University of Pennsylvania, and
a BS in Electrical and Computer Engineering from Cornell University.
GABE TSUBOYAMA: Gabe will be joining the investment team in November to lead risk
arbitrage and event-driven strategies. Previously, he was a Portfolio Manager at HBK Capital
Management, where his responsibilities included risk arbitrage and special
situations. Before HBK, Gabe was a Director at Allen & Company and a member of the event
driven hedge fund team. Gabe was an A.B. Duke scholar at Duke University and graduated
cum laude with a B.S.E. in Mechanical Engineering and Economics.
KATHY XU: Kathy joined the consumer team in September. Previously, she was Director of
Corporate Development at Moda Operandi, a New York-based luxury e-commerce business.
Prior to joining Moda Operandi, Kathy worked in private equity at Apax Partners, where she
covered the internet and tech-enabled services sectors. Kathy started her career at Evercore
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in its mergers & acquisitions advisory group. She graduated with honors from the Ivey
Business School at Western University.
Quarterly Investor Update Call
Our Q3 2020 Portfolio Review and Business Update will be held on October 21, 2020. A
replay of the call will be available for one month following its conclusion upon request from
Investor Relations.
Please contact Investor Relations at ir@thirdpoint.com or at 212.715.6707 with questions.
Sincerely,
Daniel S. Loeb
CEO & CIO
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