Tiger Global Struggles to Attract Investors for $6 Billion Fund
Tiger Global, a major venture capital firm based in New York with $60 billion in assets, is having difficulty raising funds for its latest private equity fund. After eight months of fundraising, the firm has secured just over $2 billion, well short of its $6 billion goal. This underscoring concern about valuations of tech companies and reflects a broader trend of venture capital firms struggling to attract investors.
The firm began raising money for its 16th private equity fund in October, aiming to make new investments in undervalued companies. However, it completed the fund’s “first close” in January and has since been unable to reach its target. Tiger Global is seeking money from large institutional investors and wealthy individuals, such as pension funds, sovereign wealth funds, and those with cash at brokerage firms like Morgan Stanley.
Tiger Global’s difficulties in raising funds is not an isolated incident. Insight Partners, another New York-based venture capital firm, raised just $2 billion for a $20 billion fund it launched last June. It recently told investors that it was narrowing its goal to $15 billion. This decline in fundraising can be attributed to a sharp decrease in venture capital financing, which has fallen to levels not seen in a decade.
The decline in valuations of tech companies and souring investor sentiment toward illiquid private markets are major contributors to this trend. US venture capital firms raised nearly $12 billion in the first quarter, a 73% decline compared to the same period last year.
Tiger Global’s latest private equity fund’s goal of $6 billion is significantly less than the $12.7 billion raised for its previous fund in 2021. This adjustment reflects investor wariness and declining valuations in the market.
Tiger Global, founded by Chase Coleman in 2001, has established itself as one of the most active venture capital investors over the past decade. It has invested over $20 billion in private start-ups since the start of 2020, backing hundreds of companies including TikTok parent company ByteDance, fast-fashion company Shein, and payments start-up Stripe.
The Impact of Tiger Global and Other Large Investors on Valuations
Tiger Global, along with other large investors such as SoftBank and Coatue, played a significant role in driving up tech company valuations before the recent downturn in the market. Their enthusiasm for investing in private technology groups contributed to a surge in valuations.
However, these investors are now less active, according to several founders they back. This change in behavior has raised concerns among startups that they will have to accept lower valuations in order to raise funding in the future.
Despite the challenges faced by Tiger Global’s latest fund, its previous fund, known as PIP 15, has seen some successful investments. The fund focused on early-stage investments, with an average check size of $30 million. Through these investments, Tiger Global has built a “significant ownership” position in OpenAI, the parent company of generative AI start-up ChatGPT.
In October, Tiger Global’s letter to investors revealed that OpenAI had recently raised $300 million in funding rounds that valued the company at $29 billion. This success highlights the potential for significant returns in early-stage investments.
In Conclusion
Tiger Global’s struggles to attract investors for its latest private equity fund reflect the broader challenges faced by venture capital firms in raising funds. The decline in valuations of tech companies and investor wariness toward illiquid private markets have contributed to this trend.
While some investors have scaled back their ambitions and adjusted their fundraising goals, the downturn in venture capital financing has impacted the overall industry. Startups may need to accept lower valuations in order to secure funding in the current market environment.
Despite these challenges, Tiger Global’s previous fund has seen success with early-stage investments, showcasing the potential for significant returns in this segment of the market.
In summary, the struggle faced by Tiger Global in attracting investors for its $6 billion fund reflects broader trends in the venture capital industry. The decline in valuations and investor sentiment toward tech companies and illiquid private markets have impacted fundraising efforts. However, early-stage investments continue to hold potential for significant returns.
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Tiger Global is failing in its latest attempt to attract new investors, securing just over $2 billion for a fund set for $6 billion after eight months, underscoring concern about valuations of tech companies.
Based in New York Tigerwhich has $60 billion in assets, began raising money for its 16th private equity fund in October with plans to make new investments in companies it believes are undervalued.
It completed the fund’s “first close” — at which point funds typically raise more than half the expected amount — in January and remains well short of its $6 billion goal, according to a securities filing on Friday. He’s still trying to raise more money.
Tiger is the latest major venture capital firm that has struggled to raise funds. New York-based Insight Partners raised just $2 billion for a $20 billion fund it launched last June and told investors this week it was narrowing its goal to $15 billion.
Venture capital financing it has tumbled in the past six months to levels not seen in a decade as investors soured on illiquid private markets and the value of tech companies plummeted. US venture capital firms raised nearly $12 billion in the first quarter, a 73% decline from the same period last year.
Tiger is seeking money from large institutional investors such as pension funds and sovereign wealth funds, as well as wealthy individuals with cash at large brokerages such as Morgan Stanley.
Even early on, Tiger had scaled back ambitions. The goal was less than half of the $12.7 billion it raised for its latest private equity fund in 2021, reflecting investor wariness and declining valuations.
Tiger declined to comment. A person familiar with the fundraising effort said the group was “happy” with the progress so far.
Tiger, founded by Chase Coleman in 2001, has emerged as one of the most prolific venture capital investors over the past decade having backed hundreds of startups. It has invested more than $20 billion in private start-ups since the start of 2020, according to documents seen by the Financial Times.
Its largest private holdings include stakes in TikTok parent company ByteDance, fast-fashion company Shein, and payments start-up Stripe.
During a pandemic-era tech valuation boom, Tiger turned the venture capital world upside down by offering founders huge checks with few of the demands private equity groups often make, such as board representation.
The enthusiasm of Tiger, as well as other large investors in private technology groups such as SoftBank and Coatue, was a significant factor in the sharp increase in valuations before the recent turnaround.
But these investors are now less active, according to several founders they back, raising fears that startups will have to accept much lower valuations if they are to raise cash again.
However, some bets made by Tiger’s former fund, known as PIP 15, are paying off.
The fund has focused on early-stage investments with an average check size of just $30 million and has built a “significant ownership” position in OpenAI, the parent company of generative AI start-up ChatGPT, according to a October letter to investors.
OpenAI recently raised $300 million in rounds that valued it at $29 billion.
https://www.ft.com/content/6ef0ed94-dcf6-4056-b884-8a7ef2d96c1e
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