Tiger Global, hit by $17 billion in hedge fund losses, nearly exhausted its newest venture capital funds – TechCrunch

Tiger Global has a year.

According to a new report from the Financial Times, the low-flying 21-year-old who appears to be ubiquitous has seen About 17 billion dollars During this year’s tech stock sell-off. The Financial Times notes that this is one of the biggest dollar drops for a hedge fund in history.

Shockingly, according to the Financial Times, according to the calculations of a hedge fund managed by the Edmond de Rothschild group, the assets of Tiger Global’s hedge fund have been hit so hard that the foundation has fizzled out in about four months. two-thirds of its earnings Since its launch in 2001. (Ouch.)

The question is whether the onslaught will affect the company’s business, which has ballooned rapidly in recent years – as have many other venture firms. In 2020, the company closed its 12th investment fund with $3.75 billion in capital commitments. Early last year, it closed its thirteenth investment fund (named XIV for superstitious reasons) with 6.65 billion dollars Before closing her new fund, XV Fund, with huge money $12.7 billion In capital commitments in March of this year.

Until now who – which The new fund — which reportedly took less than six months to raise and includes commitments of $1.5 billion from Tiger Global employees — has been nearly fully invested, according to a source close to the company.

On the other hand, it’s not entirely surprising for anyone to notice that Tiger Global has already put a lot of money into the business. . added 118 Unicorn Corporation to its portfolio companies list last year, according to Crunchbase News, and it continued to outperform every other investor in the first quarter of this year.

Those rounds, at least until earlier this year, weren’t small. In December, Tiger Global led a $1.8 billion from Series B Investing in a nuclear fusion startup Commonwealth Fusion Systems. In November, he drove a $600 million from Round D For the Norro Electric Vehicle Company.

The 78 deals it led in the first quarter of this year — including a $768 million Series E round for Getir, an on-demand delivery service in Istanbul, a $530 million Series D round for Paris-based online bank Qonto and $273 . One million rounds of Series C for the French wholesale market Ankorstore – it ended up in companies that collected en masse $7.6 billionCrunchbase News reported last month.

However, 12.7 billion dollars is a Much out of money, and it wasn’t until June.

The question, of course, is how much money Tiger Global can raise for its next fund – and when.

In all likelihood, the company – which declined to comment – has concessional commitments already in place based on its recent performance. According to a letter to investors obtained by TechCrunch, the company’s private portfolio funds — as of the end of the first quarter of this year — have generated a 25% net internal rate of return since their inception in 2003.

In the first quarter of this year, the company wrote, “The residual value in funds decreased by 9%, after increasing by 54% in 2021.” (This value presumably sank further in the second quarter, as valuations began to fall broadly across the startup ecosystem.)

According to the same investor letter, Tiger Global boasts stakes in 38 companies that went public last year — including Coinbase, Freshworks, SentinelOne and Toast — and says it distributed $3.7 billion to investors last year.

Either way, there’s hardly a worse time to raise another mega investment fund. Almost every institutional investor in the world has seen their portfolio suffer. This is not the same as venture capital firms allocating money inside a giant piggy bank; They demand committed capital from their investors when they need it.

This process allows venture capitalists to start the clock for each investment as soon as the check is written, but it also exposes them to extreme market volatility. When public stocks start to fall like they do now, college endowments, pension funds and other institutional investors are getting increasingly loath to meet their capital commitments because that means having to sell off shares of public companies that are still underwater.

These same institutions usually withdraw from their new financial commitments, because as their public market portfolios shrink, they become burdened with their private market allocations. (Most of them have goals they are supposed to meet to make sure they are diverse enough.)

Current trends will start to affect everyone if the market doesn’t bounce back again, but with Tiger Global’s performance changing dramatically even four months ago, the terrain could be particularly challenging for its team.

It certainly has a weaker argument. According to FT, hedge fund investors who invested in the 2001 launch of Tiger Global have made more than 20 times their initial investment — despite their massive new losses. But that’s double the return they would have made by investing in the S&P 500 over the same 21-year period (and that doesn’t take into account Tiger Global’s management fees).

Meanwhile, Tiger Global’s bets could veer – along with the investments of several other companies – if the exit market does not improve.

Tiger Global seems to have seen what’s to come. Its team, which operates as a unit to conduct both hedge fund and project betting, had already abandoned late-stage project deals by early February, in the name of The Information I mentioned in the same month.

Keith Rabois, the owner of venture capital, whose company, Funders Fund sometimes competes with hedge funds, told The Information at the time that some pullback from those giant rounds was inevitable given the falling prices of publicly traded tech stocks. “If you have a high burn rate and raise money at high prices, you will hit a brick wall very quickly,” he said of late start-ups. “There is no free money anymore.”

It’s easy to wonder if Tiger Global’s turnaround strategy to early-stage startups is too late, and there’s no quick answer on that front. Unlike its hedge fund business, Tiger Global has the luxury of some time before judging its latest investment bets. (The company has historically enjoyed some big project gains, including bets on Facebook, Linkedin, Airbnb, and Peloton.)

In the meantime, Tiger Global, which takes pride in its due diligence, may celebrate a separate clear win for the time being. It passed on the one-click company Bolt, which is currently being sued by its largest client for “completely failing to deliver the technological capabilities it was deemed to have,” the client says, and its former employees say it tends to exaggerate its metrics.

Like the New York Times Today’s Books In an article on Bolt, after Tiger Global executives met with the company, they weren’t entirely sure that the dealers Bolt had pointed out to them would use Bolt after the trial, and considered Bolt’s revenue forecasts to be overly optimistic.

While several big-hit companies have embarked on Bolt’s financing, including General Atlantic, WestCap and Untitled Investments — a company founded by a former Tiger Global investor who left the company in 2017 — Tiger Global has endorsed the deal.