The Rise and Fall of Tiger Global’s Influence
Tiger Global, a New York-based hedge fund, played a significant role in fueling the pandemic-era venture capital boom. In 2021 alone, the firm backed over 315 startups, according to PitchBook data. This aggressive investment strategy led to sky-high valuations for many of these companies. However, the firm’s influence was not without controversy.
Criticism from the VC Industry
Many in the VC industry were critical of Tiger Global’s investing frenzy, even at the time. The firm’s decision to invest heavily in unproven startups created a sense of unease among some investors. As one observer noted, "Tiger Global’s strategy was akin to throwing spaghetti on the wall and seeing what sticks."
The Backlash: When Valuations Dropped
However, when the U.S. Fed began to rapidly raise interest rates in 2022, money grew tighter, and valuations of startups dropped significantly. Many of Tiger Global’s investments, including email company Superhuman (down by 45%), search engine DuckDuckGo (by 72%), and NFT marketplace OpenSea (by 94%), suffered significant losses.
The Impact on Tiger Global’s Performance
A recent disclosure by one of Tiger’s investors shows that the investment performance of the firm’s fifteenth fund is particularly poor. As of June 30, 2024, the paper losses on Tiger Global PIP 15 stand at more than 15%. This places the fund in the bottom 10 percent of all venture funds raised in 2021, according to PitchBook Benchmarks.
Comparison with Peer Funds
Other 2021 vintage funds in the CalSTRS portfolio are faring noticeably better. For example, Valor Equity Partners’ fifth fund paper returns stand at a robust positive 15.7%, while OakHC/FT’s 2021 fund generated returns of 8.7%. IVP and GGV (which rebranded as Notable Capital) also had respectable returns of 4.1% and 2.8%, respectively.
Tiger Global’s Fundraising Ambitions
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 due to difficulties in fundraising. The firm’s decision to reduce its investment pace and focus on more established companies has led some to speculate about the future of its influence in the VC industry.
Leadership Changes at Tiger Global
Top leadership changes have also occurred within the firm. Top adviser Samir Kaji left the company earlier this year, while top executive Dan Zhang took over as interim CEO. The changes raise questions about whether the firm will continue to pursue its aggressive investment strategy or adopt a more measured approach.
Implications for the VC Industry
The performance of Tiger Global’s fifteenth fund serves as a cautionary tale for investors and startups alike. While the firm’s influence was once significant, its recent struggles highlight the risks associated with investing in unproven companies during times of market uncertainty.
What’s Next?
Only time will tell whether Tiger Global can recover from this setback or if its influence has indeed waned in the VC industry. However, one thing is clear: the firm’s actions have sent a ripple effect throughout the startup ecosystem, leaving many to wonder about the future of venture capital investments.
Sources
- PitchBook data
- CalSTRS portfolio performance
- Venture Capital Journal
About the Author
Marina Temkin is a venture capital and startups reporter at TechCrunch. Prior to joining TechCrunch, she wrote about VC for PitchBook and Venture Capital Journal. Earlier in her career, Marina was a financial analyst and earned a CFA charterholder designation.
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