A new disclosure shows, again, how badly Tiger’s ‘pray and spray’ fund performed
Tiger Global famously fueled the pandemic-era venture capital boom, investing heavily in a wide range of startups, setting up bidding wars for even the most unproven startup that led to sky-high valuations. In 2021 alone, the hedge fund backed 315 startups, according to PitchBook data.
And much of the VC industry was not happy about it, even at the time. Toward the end of 2021, the New York firm convinced its investors to commit $12.7 billion for its fifteenth venture fund (titled PIP 15) and then proceeded to plough the majority of that capital into more startups over the next several months. By May of 2022, most of the money in that fund had already been fully invested, TechCrunch reported.
The firm’s brisk investment strategy backfired. When the U.S. Fed began to rapidly raise interest rates in 2022, money grew tighter and valuations of startups dropped significantly. And, as 2024 closes, the impact of Tiger’s influence is still being felt as startups are still grappling with not living up to their 2021 valuations.
And here’s the thing: a recent disclosure by one of Tiger’s investors shows that the investment performance of Tiger Global’s fifteenth fund is particularly poor, while many other funds of the era had moderate returns.
As of June 30 2024, the paper losses on Tiger Global PIP 15 stand at more than 15%, according to a recently released report from California State Teachers’ Retirement System (CalSTRS), one of Tiger’s investors. Such steep losses places the fund in the bottom 10 percent of all venture funds raised in 2021, according to the latest PitchBook Benchmarks.
The firm marked down many of the investments it made for peak valuations, including email company Superhuman, down by 45%, search engine DuckDuckGo by 72% and NFT marketplace OpenSea by 94%, Bloomberg reported last year.
Tiger Global and CalSTRS declined comment.
It’s true that a VC fund typically takes 10 years before whatever returns it achieves are not just paper, but locked in, through exits or other financial sales. So it’s possible that some of these companies will grow back and beyond their 2021 highs.
However, other 2021 vintage funds in the CalSTRS portfolio are faring noticeably better. For example, Valor Equity Partners’ fifth fund paper returns (a measure known as internal rate of returns) stands at a robust positive 15.7%, according to the report. Meanwhile, the 2021 funds from OakHC/FT, IVP, and GGV (which this year rebranded as Notable Capital) have generated returns of 8.7%, 4.1%, and 2.8%, respectively.
Although many large venture investors, including Andreessen Horowitz, General Catalyst, and Kleiner Perkins, succeeded in raising substantial funds this year, Tiger Global curtailed its private markets ambitions in part because it couldn’t raise as much fresh capital as it originally intended. Specifically, in October 2022, Tiger Global set out to raise $6 billion for its sixteenth private markets fund. The fund target was later revised to $5 billion, the Wall Street Journal reported.
But the New York firm failed to raise even half of its new goal. After fundraising capital for about 18 months, PIP 16 closed with just $2.2 billion in commitments earlier this year, Bloomberg reported. That’s still a sizable fund. But not compared to its earlier ambitions.
Still, Tiger Global still has a considerable war chest to invest in startups. So far this year, the firm participated in 24 VC deals, including Waymo, OpenAI, Scale AI and Wiz, according to PitchBook data.
Although nearly three years have passed since the height of Tiger Global’s investing frenzy, it will take time for the firm to shake off its reputation as an investor that made many wrong bets during the pandemic.
Some of the people who were in charge of that era’s rapid fire VC investment strategy are no longer at the firm. John Curtius, one of the leading VC investors at Tiger Global, left the firm in late 2022 to start his own firm, called Cedar Investment Management. According to reports, the firm was looking to raise $1 billion. It’s not yet clear if the fund was raised nor if it began to make investments. Tiger Global’s VC head Scott Shleifer also transitioned to an adviser role at the beginning of the year.
