Tiger Global Management rode the tech boom like no other investment firm. It was funding more startups than any other U.S. investor when the market peaked last year, and had tens of billions of dollars from pensions, endowments and rich clients riding on some of Silicon Valley’s hottest stocks.
With tech values plunging, the New York firm is humbled. The market rout has vaporized years of gains in a matter of months, calling into question Tiger’s big bets.
Fueling Tiger’s rise was a double-barreled business: A stock-picking arm put money mostly into public companies, while its venture-capital funds invested in startups throughout the world. Both bet bigger on tech as the market crested, leaving the firm exposed on both fronts.
Tiger said in a note to investors last week that its hedge fund, which managed $23 billion at the end of 2021, was down 52% this year. That is one of the largest-ever losses by a hedge fund. Its other large stock fund—a long-only fund that managed $11 billion at the end of 2021 and doesn’t short stocks—has lost 61.7%.
At the end of April, the rout had wiped out roughly two-thirds of the gains Tiger had made in those stock funds since its founding, estimates money manager LCH Investments.
Meanwhile, Tiger’s venture-capital funds are bracing for a slowdown in the tech-startup sector. As companies pivot from rapid growth to layoffs and cash preservation, write-downs on Tiger’s venture funds—valued at $64 billion at year-end—have begun and more are likely. Large venture-capital firms are warning of harsh times to come.
Cheap money reshaped Silicon Valley over the past decade, as pension funds, rich investors and celebrities turned to well-connected money managers to put money in startups and fast-growing tech companies. As stocks rose during the pandemic, gains by tech funds attracted more investors into the sector, even as valuations pushed well above historic norms.
Tiger, led by 46-year-old founder Charles “Chase” Coleman, stood out in the frenzy. Its venture-capital business in March raised a $12.7 billion fund, one of the industry’s largest ever. Tiger overall invested in 361 deals in 2021, up from 16 deals for all of 2017, more than any other U.S. manager, according to research firm Pitch Book Data Inc. It often outflanked longstanding venture firms by moving faster and agreeing to more generous terms with startups—sometimes offering money to companies hours after meeting, some startup founders say.
Its venture-capital arm, run by Scott Shleifer, 44, has cut back on deal-making, particularly investments in startups that are nearing IPOs and need more cash. Tiger also has steered startup investments toward younger companies, the company has told startup founders—a risky bet that will take years longer to bear much fruit.
Tiger hasn’t commented on the losses publicly but has written regular missives to investors in its stock-picking funds, which also include some startup investments, expressing a mix of contrition and continued confidence in tech. “Our team remains maximally motivated to earn back recent losses,” Tiger wrote last week, adding it was “highly confident in our investment process and the returns we will generate over the long term.”
Valuation warnings
It was Tiger’s venture business that truly took off. Armed with booming valuations from earlier fund bets on video game platform Roblox Corp. and nicotine-vaping company Juul Labs Inc., Mr. Shleifer went on a fundraising spree, finding a wellspring of eager investors. Tiger set out to raise $3.75 billion for a fund in 2020 and ended up with $6.7 billion, it said in securities filings.
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