Tiger Global Management plans to raise $15.4 billion.

Some time ago, I wrote that many VC and PE firms that had raised funds in this round were scaling down. In this regard, the whole world is in the same boat.

According to foreign media reports, Tiger Global Management is about to launch a new venture capital fund, PIP 17. People familiar with the matter revealed that the fundraising target this time is $2.2 billion. My first reaction upon seeing this figure was quite emotional. After all, when PIP 16 was launched, the target was $6 billion, and the final scale reached was $2.2 billion.

The relatively conservative fundraising strategy is said to be due to concerns about the possible bubble in the artificial intelligence field. Of course, Tiger Global has not publicly responded to this news yet.

In the past few years, my colleagues have written many reports about Tiger Global, recording how this "Wall Street tiger" went from making crazy investments in 2021 to suffering frequent setbacks in the following years. From being a fierce tiger charging down the mountain to being cautious and shrinking now, the turning point of Tiger Global comes not only from the market but also from the era. Its glory, slowdown, and adjustment almost condense all the emotions of this round of the global capital cycle.

Tiger Global Loses Its Fangs

The highlight moment of Tiger Global in recent years was in 2021. It made investments quickly and aggressively, investing nearly $30 billion in startups and leading 212 rounds of financing. My colleague wrote an article titled "Tiger Global Unveils a Fear in VC", which mentioned that Tiger Global began raising its previous fund (PIP 15) in early 2021 with a target size of $10 billion. By October, the first - close size had reached $8.8 billion, and at this time, one - third of the fund's investments had already been made. This fund was eventually over - subscribed by 27%, reaching a size of $12.7 billion.

However, in less than two years, the might of this tiger has diminished significantly. After the market downturn in 2022, Tiger Global significantly reduced its new private equity investments and opened its entire investment portfolio to secondary market bidding to release some liquidity. In March 2023, Tiger Global marked down the overall value of its VC investment portfolio by about 33%, including a significant reduction in the valuation of ByteDance. In April, that $12.7 - billion mega - fund recorded a book loss of about 20% (as of the end of 2022), which means a loss of more than $2.5 billion in one year.

Later, in 2024, when raising PIP 16, the expected fundraising amount was $6 billion, but only $2.2 billion was ultimately raised. Also in this year, Scott Shleifer, the head of the company's private equity investment, officially resigned, ending his more than twenty - year leadership in the venture capital department of Tiger Global. The department was taken over by Chase Coleman himself.

Meanwhile, Tiger Global also established a new private equity investment committee to assist Chase Coleman in making investment decisions. This is the biggest personnel change in the more than 20 - year history of Tiger Global.

It's all about timing and fortune. What has happened in the past few years has gradually led to a consensus among institutions and individuals: no one can escape the choices of the era and the cycle.

In July 2022, American independent media person Eric Newcomer disclosed Tiger Global's fundraising documents, which not only showed the overall performance of Tiger Global in the past 20 years and the specific performance of each fund but also revealed some details of its investment in the Chinese market. More importantly, it presented Tiger Global's reflection on its own strategy.

My colleague summarized it into three main parts. Two of them are related to "investment" and "exit": investing too late and selling too early - this is Tiger Global's reflection on its own investment ability; the third part covers four quadrants, indicating Tiger Global's insufficient understanding of systematic risks, that is, wrong judgments. These problems essentially stem from the relatively aggressive investment strategy at that time, which was "a real money game" - the raised money was just "inventory", following the principle of "small profits but quick turnover". It didn't matter if the projects were a bit more expensive or the quality of the invested companies was a bit lower. As long as the turnover was fast enough, a good IRR (Internal Rate of Return) could still be achieved.

In 2021, this strategy made sense. That year, the market presented an unprecedented one - sided situation. The extremely loose monetary policy of the Federal Reserve released a surging amount of liquidity, pushing the VC/PE market to its historical peak: the total number of venture capital events, the investment scale, the financing amount from the seed stage to the growth stage, the fund exit scale, the fundraising scale, the IPO exit amount... Almost all key data reached record highs. The overflow of liquidity led to soaring valuations, and the premium ability of high - quality assets was also pushed to the highest point.

According to Pitchbook statistics, within the U.S. market, the valuations of angel and seed - stage investments completed in 2021 increased by 50% compared with 2020, while the valuations of angel and seed - stage startups in the European market increased by 30% year - on - year. The valuation inflation in the later - stage PE stage was even more exaggerated. The average valuation directly doubled compared with 2020. Only in the U.S. market, 340 unicorn - level financing events occurred, exceeding the total of the past five years, and 75% of these unicorn transactions were forced up with a PE of over 20x.

This was not only a feast for Tiger Global but also the emerging moment for many new funds. For example, Andreessen Horowitz (a16z), a top - tier venture capital firm in Silicon Valley now, experienced its biggest exit wave since its establishment in 2021. My other colleague mentioned in the article "The Most Aggressive VC in 10 Years Earned $25 Billion" that a16z's fundraising documents showed that since 2011, the net return it has created for LPs has reached $25 billion (about 178 billion yuan), and the cumulative cash return scale has reached as high as $37 billion (about 263 billion yuan). The majority of these earnings came from 2021. That year, a16z's exit scale reached as high as $15.143 billion (about 107.8 billion yuan), and the TVPI (Total Value to Paid - In Capital) of its third - phase fund reached 9.4.

The same was true in the domestic market. At the 2021 China VC/PE Annual Conference, there was a forum discussing the topic that the "involution" of domestic VC and PE was becoming increasingly serious. The blurring of the boundaries between PE and VC was no longer a trendy trend but a reality on the desks of all VC and PE firms. A very important reason was that everyone was accelerating, and no one wanted to miss that window of surging liquidity.

However, under the cycle, all the "good - looking" numbers bear the mark of the era. When liquidity was extremely abundant, a high IRR could be the key selling point for mega - funds to raise capital and also a way to "educate" less - professional LPs. But when the Federal Reserve entered the interest - rate - hiking cycle, asset valuations shrank rapidly, and the market returned from the growth myth to the cash reality. LPs no longer obsessed over IRR but fixed their eyes on DPI. Against this background, the strategies of "extreme speed" and "small profits but quick turnover" failed, and it was also expected that the strategy relying on turnover to drive returns would be impacted.

Reducing AI Investments

The disappointment of one fund cannot completely deny its past performance, let alone further deny the Growth investment strategy. Especially during those past sluggish years, Tiger Global also obtained the light to cross the cycle through several key bets.

In 2021, Tiger Global made its first investment in OpenAI when its valuation was still less than $16 billion; in the same year, it also bet on Waymo when its valuation was about $39 billion. In the latest fundraising materials, Tiger Global emphasized that these two early - stage layouts brought remarkable book returns. The largest positions in the PIP 16 fund currently are OpenAI and Waymo, and these positions have directly boosted the fund's rebound performance this year. In a conference call with LPs, Tiger Global revealed that the PIP 16 fund has risen by 33% so far this year, and the PIP 15 fund has risen by 16% during the same period.

This means that Tiger Global has regained the qualification to "continue betting". Tiger Global said that the companies it will focus on include the digital bank startup Revolut, ByteDance (the parent company of TikTok), and emerging companies such as Flock Safety, Harbinger, Rokt, Cargomatic, and BVNK, which are distributed in different sectors such as security, electric vehicles, cross - border e - commerce, logistics, and cryptocurrency payment.

However, compared with the mega - funds in the early 2020s, Tiger Global's latest fundraising strategy is obviously much more conservative. The reasons for this caution are quite interesting. According to the leaked letter to LPs and the recording of the conference call, investors are worried about the valuation bubble in the artificial intelligence field. "The valuations are too high, and in our view, sometimes lack the support of the company's fundamentals," the company wrote in the letter. "We also recognize that it is crucial to maintain a humble attitude in the face of such a huge technological change."

This caution has already been reflected in the secondary market. In the quarter ending September 30, Tiger Global reduced its stake in Meta by 62.6% to 2.8 million shares, worth about $2.1 billion.

In the past few weeks, U.S. technology stocks supported by the AI narrative have been continuously sluggish due to concerns about the bubble. The bulls and bears have engaged in a fierce battle, including legendary figures and established institutions in the U.S. capital market. The core of the debate is whether there is a bubble in the valuation increase brought about by this round of AI and whether the bubble is about to peak.

Of course, for institutions, whether to go all - in on AI probably depends on the judgment of the cycle and also on each institution's own strategy.

In October this year, a16z was reported to be planning to raise a new fund with a scale of up to $10 billion (about 71.216 billion yuan), of which $6 billion will be used for the Growth Fund to continue supporting mid - to late - stage projects that have shown strong growth potential.

This reflects a16z's shift in investment strategy in the current market environment: from widely spreading the net in the early stage to focusing more on "certain" opportunities that have or are about to enter the fast lane of commercialization. As Martin Casado, a partner at a16z, pointed out, "The idea that non - consensus investment is where alpha lies is actually quite dangerous in the early stage." As projects enter the mid - to late - stage, the investment direction of follow - on capital will increasingly tend towards "consensus".

In other words, this may mean that even the currently popular new funds are making bets at a faster pace while maintaining a necessary humility towards the market.

This article is from the WeChat official account "LP Spectrum", author: Wei Xianghui. Republished by 36Kr with permission.