Tiger Global, the New York-based hedge fund, is facing a significant setback in its venture capital investment strategy. According to a recent disclosure by one of its investors, California State Teachers' Retirement System (CalSTRS), the firm's fifteenth venture capital fund, PIP 15, has incurred paper losses of over 15% as of June 30, 2024. This places the fund in the bottom 10% of all venture funds raised in 2021, according to PitchBook Benchmarks.

The news comes as a stark contrast to Tiger Global's aggressive investment approach during the pandemic era, when it backed 315 startups in 2021 alone. The firm's rapid-fire investment strategy, which led to sky-high valuations, has now backfired as the US Federal Reserve raised interest rates in 2022, causing startup valuations to plummet. Many of the investments made during this period have been marked down significantly, including email company Superhuman, down by 45%, search engine DuckDuckGo by 72%, and NFT marketplace OpenSea by 94%.

The poor performance of PIP 15 is particularly notable when compared to other venture capital funds raised in 2021. For instance, Valor Equity Partners' fifth fund has generated a robust positive 15.7% internal rate of return, while OakHC/FT, IVP, and GGV (now rebranded as Notable Capital) have achieved returns of 8.7%, 4.1%, and 2.8%, respectively.

The struggles of Tiger Global's venture capital arm have also had an impact on its fundraising efforts. The firm had initially aimed to raise $6 billion for its sixteenth private markets fund but later revised the target to $5 billion. However, it ultimately failed to raise even half of its revised goal, closing the fund with just $2.2 billion in commitments earlier this year.

Despite this setback, Tiger Global still maintains a considerable war chest to invest in startups. According to PitchBook data, the firm has participated in 24 VC deals so far this year, including investments in Waymo, OpenAI, Scale, and Wiz. However, the firm's reputation as an investor that made many wrong bets during the pandemic era will likely take time to shake off.

Some of the key players involved in Tiger Global's rapid-fire investment strategy during the pandemic era are no longer with the firm. John Curtius, a leading VC investor, left the firm in late 2022 to start his own firm, Cedar Investment Management, which is reportedly looking to raise $1 billion. Additionally, Tiger Global's VC head Scott Shleifer transitioned to an adviser role at the beginning of the year.

The story of Tiger Global's venture capital fund performance serves as a cautionary tale for the venture capital industry, highlighting the risks of rapid investment strategies and the importance of disciplined investing in a shifting market landscape.