There's a perception in Silicon Valley that every investor wants to do business with Peter Thiel. But the venture capital funding environment has become so difficult that even one of the VC firms he helped found, Valar Ventures, raised far less money this year than in previous years.
Mr Thiel founded Valar in 2010 and appointed Andrew McCormack and James Fitzgerald as managers. The two previously worked at his family office, Thiel Capital, and Clarium Capital Management, a now-defunct hedge fund founded by Thiel. It's unclear how involved Tyr is with the Valar these days. His name was not listed on the company's website as a team partner for many years.
The New York-based company successfully raised $300 million in funding for Valar Fund IX, according to a May 17 SEC filing. This is a decent-sized fund, but less than half the size of its predecessor fund, which closed in July 2022 with $665 million. Valar raised more than $863 million for Fund VII in late 2021, according to SEC filings.
Valor is not the only firm, regardless of its prominent name, to reduce the target capital for its latest fund as the venture fundraising environment tightens. Tiger Global fell 63% short of its original target in its latest fundraise. Insight Partners also lowered its fundraising target last year. And Founders Fund, perhaps Thiel's most prestigious venture capital firm, cut the target for its eighth venture capital fund in half, from about $1.8 billion to about $900 million in 2023, reportedly for strategic reasons rather than in response to fundraising. (And it also raised a second growth fund of $3.4 billion at the same time, Axios reported.)
“Raising these funds in the current market is an important vote of confidence in our team and strategy,” Fitzgerald told TechCrunch in an email, but did not respond to TechCrunch's questions about Valar's current relationship with Thiel.
Again, other funds with big names have also done very well in their fundraising efforts. ICONIQ Growth successfully met its seventh flagship growth fund's fundraising goal of $5.75 billion this month, up from $3.75 billion for its sixth growth fund. ICONIQ Growth is the late-stage investing arm of his ICONIQ Capital, the private firm of some of the biggest names in technology, including Mark Zuckerberg and Jack Dorsey. And Wells Fargo once again backed Norwest Venture Partners for $3 billion for its 17th vehicle, TechCrunch reported last month.
Whether Thiel is still involved or not, LPs may not be as excited about Valard's latest fund as they once were.
“They have raised too much money and are not returning enough capital to investors,” said one LP, who requested anonymity. “The actual return on capital for investors is very low. I would say it's downright poor.”
Like any VC fund, Valar has had its share of failures. The company bet on cryptocurrency vendor BlockFi, which filed for Chapter 11 during the 2022 crypto winter. Valar invested in Breather, which provides on-demand workspaces. After raising $127 million, it sold its assets for just $3 million in 2021.
Valar also invested in German insurtech company Koya, which raised a total of $40 million before being sold to France-based insurance startup Luco in an all-stock deal in 2022. A year later, Luco, which had raised around €72 million, went into receivership and was eventually sold to Allianz for €4.3 million earlier this year.
Valar's biggest success to date appears to be Wise, which listed on the London Stock Exchange in 2021 with a market capitalization of $11 billion. The company first backed the money transfer company with a Series A in 2013. The company's current portfolio companies also include Robinhood competitor Stash, which was valued at $1.4 billion in 2021, and cryptocurrency exchange Bitpanda, which was recently valued at $4 billion.
Many of the firm's other investments are too young to be called Majority, a digital bank for U.S. immigrants that's undergoing a series of Series B expansions but told TechCrunch it's nearing profitability.
Valar's actual performance across all of its funds is difficult to obtain as it is not public information, but according to public records from the Pennsylvania Public School Employees' Retirement System, the internal rate of return (IRR) for the company's 2020 vintage funds has so far So far, it has fallen by -2.3%. (PSERS), one of his on Valar's LP. However, it is too early to draw conclusions about the success of this fund, which is only three years old. Private funds typically take 10 years to mature, but this one covers a particularly bad period for the venture industry, where valuations reached unsustainable highs in 2021 and crashed in 2022.
Named after the gods from J.R.R. Tolkien's The Lord of the Rings, Valar (Mr Teal almost always names his companies after characters in The Lord of the Rings) was originally founded in New Zealand. Focused on supporting start-up companies. But even though Valar once claimed to only focus on startups outside of Silicon Valley, it quickly expanded beyond this small country to include companies based in Europe, the UK, and the SF Bay Area. The support has expanded. The company currently specializes in fintech startups around the world.