Tiger Global famously fueled the pandemic-era venture capital boom, investing heavily in a wide range of startups, launching bidding wars for even the most unproven startups, and driving them to sky-high valuations. Hedge funds backed 315 startups in 2021 alone, according to PitchBook data.
And many in the VC industry weren't happy about this even back then. Towards the end of 2021, the New York company persuaded investors to commit $12.7 billion to its 15th venture fund (named PIP 15), and in the months that followed put most of that money into even more funds. Started pouring into startups. By May 2022, most of the fund's money was already fully invested, TechCrunch reported.
The company's aggressive investment strategy backfired. When the U.S. Federal Reserve began rapidly raising interest rates in 2022, money became tighter and startup valuations plummeted. And as 2024 draws to a close, the effects of Tiger's influence are still being felt, with startups still struggling to reach 2021 valuations.
And here's the problem: A recent disclosure by one of Tiger's investors showed that Tiger Global's 15th fund's investment performance was poor, while many other funds at the time had modest returns. indicates that it was particularly bad.
As of June 30, 2024, Tiger Global PIP 15 had paper losses of over 15%, according to a recent report from California Teachers Retirement System (CalSTRS), one of Tiger's investors. Masu. Such significant losses place the fund in the bottom 10 percent of all venture funds raised in 2021, according to the latest PitchBook benchmark.
Bloomberg reported last year that the company has cut many of the investments it made at its peak valuation, including email company Superhuman, down 45%, search engine DuckDuckGo, down 72%, and NFT market OpenSeer, down 94%. did.
Tiger Global and CalSTRS declined to comment.
Indeed, it typically takes a decade for the returns achieved by a VC fund to become more than just paper and locked in through exits and other financial sales. Therefore, some of these companies may grow beyond their 2021 highs.
However, other 2021 vintage funds in the CalSTRS portfolio have performed significantly better. For example, Valor Equity Partners' fifth fund had a solid positive paper return (a metric known as internal rate of return) of 15.7%, according to the report. Meanwhile, OakHC/FT, IVP, and GGV (rebranded this year to Notable Capital) 2021 funds generated returns of 8.7%, 4.1%, and 2.8%, respectively.
While many large venture investors, including Andreessen Horowitz, General Catalyst, and Kleiner Perkins, have successfully raised large sums of capital this year, Tiger Global has not received as much new funding as originally planned. The company has scaled back its private market ambitions, partly due to its inability to raise funds. Specifically, in October 2022, Tiger Global began raising $6 billion for its 16th private market fund. The fund's goal has since been revised to $5 billion, The Wall Street Journal reported.
However, the New York company was unable to raise even half of the new goal. PIP 16 closed earlier this year with just $2.2 billion in funding after about 18 months of fundraising, Bloomberg reported. That's still quite a bit of money. But nothing compared to his previous ambitions.
Still, Tiger Global still has significant capital available to invest in startups. The company has participated in 24 VC deals so far this year, including Waymo, OpenAI, Scale AI and Wiz, according to PitchBook data.
It's been nearly three years since Tiger Global's investment frenzy reached its peak, but it will take time for the company to shake off its reputation as an investor who made many bad bets during the pandemic.
Some of the people who were responsible for the rapid-fire VC investment strategy at the time are no longer with the company. John Curtius, one of Tiger Global's main VC investors, will leave the company at the end of 2022 to start his own company called Cedar Investment Management. According to reports, the company was aiming to raise $1 billion. It is not yet clear whether funding has been raised or whether investment has begun. Scott Shleifer, head of VC at Tiger Global, also transitioned into an advisory role at the beginning of the year.