Tiger Global is experiencing challenges in attracting new investors for its latest fund, managing to secure just over $2bn out of its $6bn target after eight months. This outcome highlights concerns over the valuations of technology companies. Tiger, a New York-based firm with $60bn in assets, began raising money for its 16th private equity fund in October, aiming to invest in undervalued companies. Despite completing the first close of the fund in January, raising more than half of the targeted amount, it still falls significantly short of the $6bn goal, as indicated in a securities filing on Friday. Efforts to raise additional funds are ongoing.
Tiger is not the only large venture firm struggling to raise funds. Insight Partners, also based in New York, has collected only $2bn for a fund that initially targeted $20bn, which it has now reduced to $15bn. Investor sentiment has been affected by the collapse in venture capital funding over the past six months, reaching levels not seen in a decade. Private markets have lost their appeal, and the value of technology companies has plummeted. In the first quarter of this year, US venture firms experienced a 73% decline in fundraising compared to the same period last year, raising around $12bn.
Tiger aims to secure investments from large institutional investors, including pension and sovereign wealth funds, as well as wealthy individuals with funds at major brokerages like Morgan Stanley. Nevertheless, Tiger had already scaled back its ambitions at the beginning, setting a target of less than half the amount raised for its previous private equity fund in 2021, which was $12.7bn. This adjustment reflects investor caution and falling valuations.
Tiger declined to comment on its fundraising progress, although an insider mentioned that the group is “happy” with its current status. Founded by Chase Coleman in 2001, Tiger has become one of the most active venture capital investors over the past decade, backing hundreds of start-ups. According to documents seen by the Financial Times, it has invested over $20bn in private start-ups since the start of 2020. Some of Tiger’s largest private holdings include stakes in companies such as ByteDance, the parent company of TikTok, Shein, a fast-fashion company, and Stripe, a payments start-up.
Tiger disrupted the venture world during the tech valuation boom of the coronavirus pandemic by offering founders substantial funding with few of the demands typically made by private equity groups, such as board representation.
The enthusiasm of Tiger, as well as other major investors like SoftBank and Coatue, played a crucial role in the significant increase in valuations before the recent downturn. However, these investors have now become less active, according to several founders who have received their backing. This situation raises concerns that start-ups may have to accept much lower valuations in order to secure funding once again.
Fortunately, some investments made by Tiger’s previous fund, known as PIP 15, are yielding positive results. The fund shifted towards early-stage investments with an average investment size of just $30mn, allowing it to establish a “meaningful ownership” position in OpenAI, the parent company of ChatGPT, an artificial intelligence start-up. In a letter to investors in October, it was revealed that OpenAI recently raised $300mn, valuing the company at $29bn.
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