Tiger Global, the renowned New York-based investment firm managing $60 billion in assets, is encountering challenges in its latest endeavor to entice new investors, according to a report by Financial Times.
After eight months of fundraising, the firm has managed to secure just over $2 billion for its 16th private equity fund, which targets a total of $6 billion. This outcome underscores growing apprehension regarding the valuations of technology companies in the current market.
Tiger Global initiated its fundraising campaign for the new fund in October, aiming to make fresh investments in undervalued companies. While it achieved its "first close" milestone in January, typically representing more than half of the targeted amount, the firm remains significantly short of its $6 billion objective, according to a securities filing released on Friday. As a result, Tiger Global is still actively seeking additional capital.
This struggle to raise funds is not exclusive to Tiger Global. Other prominent venture capital firms, including New York-based Insight Partners, have faced similar challenges. Insight Partners has raised only $2 billion for a fund that initially targeted $20 billion when it launched in June last year, according to the FT report. Earlier this week, the firm informed investors that it was cutting its goal to $15 billion.
Also read: Moneycontrol Pro Panorama | Is the funding winter beginning to thaw?
The collapse of venture capital funding over the past six months has reached levels unseen in the past decade, driven by investor aversion to illiquid private markets and the declining value of technology companies. In the first quarter alone, US venture firms witnessed a staggering 73 percent decline, raising nearly $12 billion compared to the same period the previous year.
Tiger Global is actively seeking investment from large institutional investors, including pension funds and sovereign wealth funds, as well as affluent individuals with substantial holdings at major brokerages like Morgan Stanley. Despite scaling back its ambitions from previous fundraising efforts, with a target less than half the amount raised for its last private equity fund in 2021, the firm's progress has been slower than anticipated due to investor caution and decreasing valuations.
When founded in 2001 by Chase Coleman, Tiger Global gradually emerged as one of the most prolific venture capital investors, backing numerous start-ups over the past decade. Since the beginning of 2020, the firm has invested over $20 billion in private start-ups, with notable holdings in companies such as ByteDance, the parent company of TikTok, Shein, a fast-fashion retailer, and Stripe, a payments start-up.
During the pandemic-era surge in tech valuations, Tiger Global disrupted the venture capital landscape by offering significant financial support to founders with fewer demands typically imposed by private equity groups, such as board representation.
However, the enthusiasm of Tiger Global, along with other major investors like SoftBank and Coatue, has diminished in recent times, as observed by several start-up founders backed by these firms. This decline in investor activity adds to concerns that start-ups may have to accept significantly lower valuations in order to secure funding.
Also read: Startup funding tanks 79% in 5 months of 2023 as funding winter worsens
As the fundraising efforts continue, Tiger Global and other venture capital firms face the challenge of navigating a market where technology valuations have become increasingly uncertain.
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