There is a belief in Silicon Valley that every investor would love to do business with Peter Thiel. But the enterprise capital fundraising environment has change into so difficult that even Valar Ventures, one of the VC firms he helped found, raised a much smaller fund this yr in comparison with previous years.
Thiel founded Valar in 2010 and appointed Andrew McCormack and James Fitzgerald to run it. They each previously worked at his family office (Thiel Capital) and at Clarium Capital Management, the a now-defunct hedge fund Thiel’s assumption. It’s unclear how involved Thiel is currently with Valar. For many years, his name has not appeared on the company’s website among the team’s partners.
According to a May 17 report, the New York-based company successfully raised Valar Fund IX worth $300 million. Filing an application with the SEC. While this is a decent-sized fund, it is lower than half the amount of the previous fund that closed $665 million in July 2022. At the end of 2021, Valar raised over $863 million for its Fund VII, in line with SEC documents.
Valar is not the only company targeting downsizing for its latest fund amid a tougher fundraising climate for enterprise capital funds – regardless of the big names associated with them. Global Tiger increased by 63% less than originally expected in the last collection. Insight Partners also lowered its fundraising goal last yr. And Founders Fund, arguably Thiel’s most prestigious VC firm, cut its eighth enterprise capital fund’s goal in half in 2023 from about $1.8 billion to about $900 million, though it reportedly did so for strategic reasons fairly than in response to environmental fundraising (and at the same time acquired a second growth fund worth USD 3.4 billion, – Axios reported).
“Raising these funds in today’s market represents a significant vote of confidence in our team and our strategy,” Fitzgerald told TechCrunch in an email. However, he didn’t reply to TechCrunch’s query about Valar’s current relationship with Thiel.
On the other hand, other funds that have big names associated with them are doing thoroughly with their fundraising activities. ICONIQ Growth this month successfully achieved its $5.75 billion fundraising goal for its seventh flagship growth fund, in comparison with $3.75 billion for the sixth. ICONIQ Growth is the late-stage investment arm of ICONIQ Capital, the private office of some of the most distinguished figures in technology, including Mark Zuckerberg and Jack Dorsey. As TechCrunch reported last month, Wells Fargo again supported Norwest Venture Partners with $3 billion for the purchase of the seventeenth vehicle.
Whether or not Thiel is still involved, long-term investors might not be as excited about Valar’s latest fund as they once were.
“They raised too much funds and did not return enough capital to their investors,” said one investor who asked to not be named. “Their actual return on capital to investors is very low. I would say downright poor.”
Like all VC funds, Valar has had its share of mishaps. The company bet on crypto ender BlockFi, which filed for Chapter 11 during the crypto winter of 2022. Valar invested in Breather, which provided on-demand workspace. After raising $127 million sold its assets for just $3 million in 2021.
Valar also supported the German insurer Coya. After raising $40 million in total funding, Coya sold to French insurance startup Luko in 2022 in an all-stock transaction. A yr later, Luko, which had raised around €72 million in funding, stayed placed in receivership and finally sold to Allianz for EUR 4.3 million earlier this yr.
Valar’s biggest success so far appears to be Wise, which debuted on the London Stock Exchange in 2021 with a market capitalization of $11 billion. The company first backed the money transfer company during its Series A in 2013. The company’s current portfolio corporations also include Robinhood competitor Stash, valued at $1.4 billion in 2021, and cryptocurrency exchange Bitpanda, last valued at $4 billion.
Many of its other investments are too young to be called, like Majority, a digital bank for U.S. immigrants that has made a series of Series B extensions, but is near profitability, in line with TechCrunch.
While Valar’s actual performance across all of its funds is not public information and is due to this fact difficult to acquire, the company’s 2020 vintage fund is so very low -2.3% internal rate of return (IRR), in line with public records from Pennsylvania Public School Workers Retirement (PSERS), one of Valar’s LPs. However, it is too early to attract conclusions about the success of this fund, which is only three years old. Private funds typically take 10 years to mature, and this covers a particularly terrible period for ventures, with valuations reaching unsustainable levels in 2021 and then falling in 2022.
Valar, named after deities from JRR Tolkien’s “The Lord of the Rings” (Thiel almost all the time names his corporations after characters from “The Lord of the Rings”), initially focused on supporting startups in New Zealand. However, it quickly expanded its operations beyond the small country, supporting corporations based in Europe, the UK and the SF Bay Area, although at one point Valar claimed to focus exclusively on startups outside Silicon Valley. Today, he claims to specialize in fintech startups around the world.