Tiger's Fund Performance: New Disclosure Reveals Poor Results

Tiger Global's Pandemic-Era Investments Face Scrutiny

Tiger Global was a significant driver of the venture capital surge experienced during the pandemic, making substantial investments across numerous startups. This aggressive strategy frequently instigated competitive bidding situations, resulting in exceptionally high valuations for companies, even those with limited track records. Data from PitchBook indicates that in 2021 alone, the hedge fund invested in 315 startups.

Industry Concerns and Rapid Deployment of Capital

A considerable portion of the venture capital community expressed dissatisfaction with Tiger Global’s approach, even as it unfolded. In late 2021, the New York-based firm secured commitments of $12.7 billion from its investors for its fifteenth venture fund, designated PIP 15. Subsequently, the firm rapidly deployed the majority of this capital into a further wave of startup investments over the ensuing months. TechCrunch reported that by May 2022, nearly all of the fund’s capital had been fully allocated.

This accelerated investment pace ultimately proved detrimental. As the U.S. Federal Reserve initiated a series of interest rate hikes in 2022, capital became less accessible and startup valuations experienced a marked decline. As 2024 draws to a close, the repercussions of Tiger Global’s investment strategy continue to be felt, with startups still struggling to justify their 2021 valuations.

Recent Performance Disclosures Reveal Significant Losses

Recent disclosures from an investor in Tiger Global reveal particularly weak performance for the firm’s fifteenth fund, contrasting with the moderate returns achieved by many other funds established during the same period.

According to a report released by the California State Teachers’ Retirement System (CalSTRS), a Tiger Global investor, the unrealized losses on Tiger Global PIP 15 exceed 15% as of June 30, 2024. This places the fund within the bottom 10% of all venture funds raised in 2021, based on the latest PitchBook Benchmarks.

Notable Investment Write-Downs

The firm has reduced the valuation of numerous investments made at peak levels. Bloomberg reported last year that email company Superhuman was marked down by 45%, search engine DuckDuckGo by 72%, and NFT marketplace OpenSea by 94%.

Both Tiger Global and CalSTRS declined to provide further commentary.

Long-Term Perspective on Venture Capital Returns

It is important to note that venture capital funds typically require a decade to realize fully realized returns, achieved through exits or other financial transactions. Therefore, it remains possible that some of these portfolio companies will experience renewed growth and surpass their 2021 valuations.

Comparative Performance of 2021 Vintage Funds

However, other venture funds from the 2021 vintage within the CalSTRS portfolio are demonstrating significantly stronger performance. For instance, Valor Equity Partners’ fifth fund exhibits a robust positive internal rate of return of 15.7%. Funds from OakHC/FT, IVP, and GGV (now Notable Capital) have generated returns of 8.7%, 4.1%, and 2.8%, respectively.

Challenges in Fundraising for Future Funds

Despite the success of other large venture investors, including Andreessen Horowitz, General Catalyst, and Kleiner Perkins, in raising substantial funds this year, Tiger Global has scaled back its private markets ambitions, partly due to difficulties in securing the anticipated level of new capital. In October 2022, Tiger Global initially aimed to raise $6 billion for its sixteenth private markets fund, a target later revised to $5 billion, as reported by the Wall Street Journal.

Ultimately, the firm failed to raise even half of its revised goal. PIP 16 closed earlier this year with commitments of just $2.2 billion after an 18-month fundraising period, according to Bloomberg. While still a considerable sum, it falls short of the firm’s initial aspirations.

Continued Investment Activity

Despite these challenges, Tiger Global maintains a substantial investment capacity. PitchBook data shows that the firm participated in 24 venture capital deals this year, including investments in Waymo, OpenAI, Scale AI, and Wiz.

Reputational Impact and Leadership Changes

Even with the passage of nearly three years since the peak of Tiger Global’s investment activity, it will take time for the firm to overcome its reputation as an investor that made numerous unfavorable bets during the pandemic.

Key personnel involved in the firm’s rapid investment strategy during that period have since departed. John Curtius, a leading VC investor at Tiger Global, left in late 2022 to establish his own firm, Cedar Investment Management, reportedly seeking to raise $1 billion. The status of this fundraising effort and any subsequent investments remains unclear. Scott Shleifer, Tiger Global’s head of venture capital, also transitioned to an advisory role at the beginning of the year.