Tiger Global has a year.
The 21-year-old’s low-flying but seemingly ubiquitous outfit has seen losses around $17 billion during this year’s tech stock sell-off. The FT notes that this is one of the biggest dollar drops for a hedge fund in history.
Shocking, according to the FT, according to calculations by a hedge fund fund managed by the Edmond de Rothschild Group, Tiger Global’s hedge fund assets were hit so badly that in four months the company erased about two thirds of the profit since its launch in 2001. (Ouch.)
The question is whether this strike will affect the firm’s venture capital business, which, like many other venture capital ventures, has grown rapidly in recent years. In 2020, the firm closed its twelfth venture fund with a capital commitment of $3.75 billion. Early last year, he closed his thirteenth venture fund (named for superstitious reasons XIV) with $6.65 billion before closing its newest fund, Fund XV, with a huge $12.7 billion capital commitments in March of this year.
But even that The new fund, which reportedly took less than six months to raise and includes $1.5 billion in commitments from Tiger’s own employees, is nearly fully invested, according to a source close to the firm.
On the one hand, it’s not surprising that Tiger Global has already invested so much money in the work for those who pay attention to it. He added 118 unicorn companies it made its list of portfolio companies last year, according to Crunchbase News, and it continued to outperform all other investors in the first quarter of this year.
These rounds, at least until the beginning of this year, were not small. In December, Tiger Global led $1.8 billion Series B investment in a nuclear fusion startup Commonwealth Synthesis Systems. In November he brought $600 million Series D round for electric vehicle company Nuro.
78 deals closed in the first quarter of this year, including a $768 million Series E round for Istanbul-based on-demand delivery service Getir, a $530 million Series D round for Paris-based online bank Qonto, and a $273 million round. Series C round for the French wholesale market Ankorstore – in companies that have collectively raised $7.6 billionThis was reported last month by Crunchbase News.
However, $12.7 billion is lot money, and it’s not even June. (It’s not even mid-May yet!)
Naturally, the question is how much money Tiger can raise for its next fund, and by when.
Presumably, the firm we approached earlier today with unanswered questions already has soft commitments. However, there could hardly be a worse time to raise another big fund from his supporters.
Almost every institutional investor in the world has seen their stock portfolio collapse. And, as many readers know, venture capital firms don’t put money into a giant piggy bank; they call for invested capital from their investors as needed.
This process allows venture capitalists to start counting each investment as soon as the check is written, but also exposes them to extreme market volatility. When public stocks start to fall, as they are now, university funds, pension funds, and other institutional investors are reluctant to meet their capital commitments because it means selling shares of public companies that are under water.
These same institutions also routinely forgo their new funding commitments because as their public market portfolios shrink, they outweigh their private market holdings. (Most have goals they need to reach in order to diversify enough.)
Current trends will start to affect everyone if the market doesn’t bounce back, but with Tiger’s performance so drastically changed from four months earlier, the terrain could prove particularly challenging for his team.
He definitely has a weaker argument. According to the FT, hedge fund investors who invested when Tiger Global launched in 2001 put in more than 20 times their initial investment despite huge new losses. But that’s only twice the return they could have made by investing in the S&P 500 over the same 21-year period (and that’s not including Tiger’s management fees).
Meanwhile, Tiger Global’s VC rates could go sideways – along with many other firms’ investments – if the exit market doesn’t improve.
Tiger Global clearly foresaw what was coming. His team, which operates as a unit, making both hedge funds and VC bets, had largely abandoned late-stage VC deals by early February, according to The Information. reported in the same month.
Venture capitalist Keith Rabois, whose firm Founders Fund sometimes competes with hedge funds, told The Information at the time that some pullback from these mammoth rounds was inevitable given the plummeting share prices of publicly traded tech companies. “If you have a high burn rate and raise money at a high price, you hit a brick wall very quickly,” he said of late-stage startups. “There is no more free money.”
It’s easy to wonder if it’s too late for Tiger Global’s own strategy to shift towards earlier-stage startups, and there’s no quick answer to that. Unlike its hedge fund business, Tiger Global has the luxury of a while before its recent venture bets can be judged. (The firm has historically racked up several big VC wins, including stakes on Facebook, Linkedin, Airbnb, and Peloton.)
In the meantime, Tiger Global, which prides itself on its due diligence, may be celebrating at least one clear win right now. It beat out one-click payment company Bolt, which is currently being sued by its largest client for “not fully exploiting the technological capabilities it claims to have” and whose former employees, according to According to former employees, tend to exaggerate. his performance.
According to the New York Times wrote today in an article about Bolt, after Tiger executives met with the company, they weren’t so sure that the merchants Bolt had pointed them to would use Bolt after the trial, and they found Bolt’s revenue projections to be overly optimistic.
While many large firms, including General Atlantic, WestCap and Untitled Investments (a firm founded by a former Tiger Global investor who left the company in 2017), have stepped up to finance Bolt, Tiger Global has pulled out of the deal.
Credit: techcrunch.com /