Tiger Global Management, a prominent New York-based hedge fund, launched a $12.7 billion venture fund in October 2021 to support numerous tech startups within two years. The venture capital firm gained notoriety with its successful investments in a variety of tech startups around the globe. Some of its most notable investments include Facebook (now Meta Platforms Inc.), ByteDance Ltd., SoftBank Group Corp., Uber Technologies Inc., MercadoLibre Inc., Airbnb Inc., SHEIN, Stripe, Instacart and Databricks.
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But the fund recently was hit hard by the decline in private tech valuations. Tiger has informed investors that the fund suffered a paper loss of 20%, net of management fees, as of December, a substantial increase from the 8% loss reported in June 2022 and 11% loss in September. The Wall Street Journal reported that Tiger Global marked down the value of its venture capital fund investments by around 33%, just a month prior.
Some of the most notable losses include a $38 million investment in the now-bankrupt FTX and FTX.US as well as several crypto and Web3 investments, including MoonPay, Helium and Bored Ape Yacht Club.
Tiger's investment in non-fungible token (NFT) marketplace OpenSea also took a massive hit, with the firm investing $126.8 million in November 2021 and January 2022. But by the end of last year, it had marked down the investment to $30.2 million — a 76% decline.
Tiger's largest holding, TikTok parent company ByteDance, also saw a huge writedown. In mid-2021, Tiger invested $144.6 million in the China-based company. But by September of the same year, the firm valued those investments at $100.8 million. Tiger has invested more than $2 billion in ByteDance at different times and valuations.
The report shows that approximately a quarter of the most recent fund's investments are in the enterprise software as a service (SaaS) sector, with fintech and crypto being the next largest categories.
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The recent significant writedowns in Tiger Global Management's venture fund come amid news of the firm reducing the target size of its latest fund to $5 billion, down from a $6 billion target set last fall and more than 50% of what it had anticipated raising earlier last year. This news may impact the public's investments, particularly those invested in Tiger Global Management's venture fund and the tech startups it supported.
Tiger has significantly cut down on its investments in the past year, with the firm making only 21 deals so far this year compared to 158 deals in the first half of 2021, according to Crunchbase data.
Tiger's situation is not unique, as other venture capital firms and crossover investors are likely making similar cuts to their portfolios. Despite this downturn in the venture market, J.P. Morgan Growth Equity Partners closed its inaugural Growth Equity Fund at over $1 billion on April 20, indicating that some investors are still bullish on the tech sector's long-term growth potential.
Koo, an Indian alternative to Twitter backed by Tiger Global, has laid off 30% of its workforce of 260 employees over the past year, citing the need to adopt efficient and conservative approaches during these uncertain times.
Open Bank, a neobanking platform for small and medium enterprises also backed by Tiger Global, cut 47 jobs, and the company's founders have taken a 50% pay cut to optimize operations. The company has clarified that none of its employees' salaries have been reduced, and it is actively recruiting for critical functions such as growth marketing, product and sales to continue growing the business and better serve its customers.
The layoffs and pay cuts at Tiger Global-backed startups like Koo and Open reflect the broader economic challenges startups face in the current market environment. As the venture capital giant struggles with significant writedowns in its latest fund, startups in its portfolio are also feeling the squeeze and taking steps to optimize their operations.
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