The perception in Silicon Valley is that every investor would love to work with Peter Thiel. But the venture capital fundraising environment has become so difficult that even Valar Ventures, one of the VC firms he helped found, raised a much smaller amount of capital this year than in years past.
Thiel created Valar in 2010 and appointed Andrew McCormack and James Fitzgerald to run it. Both previously worked at his family office (Thiel Capital) and Clarium Capital Management, the now defunct hedge fund founded by Thiel. It’s unclear how much involvement Thiel has in the Valar these days. His name has not been listed on the company’s website among team members for many years.
The New York-based firm successfully raised a $300 million Valar Fund IX, according to a May 17 SEC filing. While this is a decent-sized fund, it’s less than half of its closed predecessor $665 million in July 2022. Valar has raised over $863 million by the end of 2021 for its VII fund, according to SEC filings.
Valar isn’t the only firm targeting less money for its latest fund amid a tougher fundraising climate for venture capital — regardless of the notable names attached. Tiger Global collected 63% less from her original goal in the last fundraiser. Insight Partners it also lowered its fundraising goal last year. And Founders Fund, arguably Thiel’s most famous VC firm, cut the target of its eighth venture capital fund in half in 2023, from about $1.8 billion to about $900 million, though it reportedly did so for strategic reasons and not in response to the fundraising environment (and at the same time raised a second growth fund of $3.4 billion, Axios said).
“Raising these funds in the current market is a significant vote of confidence in our team and strategy,” Fitzgerald told TechCrunch in an email. However, he did not respond to TechCrunch’s question about Valar’s current relationship with Thiel.
Then again, other big-name funds associated with them are doing very well with their fundraising efforts. ICONIQ Growth this month successfully hit its $5.75 billion fundraising target for its seventh flagship growth fund, compared to $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 prominent people in technology, including Mark Zuckerberg and Jack Dorsey. And Wells Fargo backed Norwest Venture Partners again with $3 billion for its 17th vehicle, TechCrunch reported last month.
Whether Thiel is still involved or not, LPs may just not be as excited about the latest Valar fund as they once were.
“They raised too much capital and didn’t return enough capital to their investors,” said one LP who asked to remain anonymous. “Their actual return on capital to investors was very low. I would say completely poor.”
Like all VC funds, Valar has had its share of mishaps. The company bet on cryptolender BlockFi filed for Chapter 11 amid the crypto winter of 2022. Valar invested in Breather, which provided an on-demand workspace. After raising $127 million, the sold her assets for just $3 million in 2021.
Valar also backed German insurance technology Coya. After raising $40 million in total funding, Coya sold to French insurer Luko in an all-in deal in 2022. Then, a year later, Luko, which had raised about €72 million in funding, was placed in reception and finally sold to Allianz for €4.3 million earlier this year.
Valar’s biggest hit so far seems to be Wise, which debuted on the London Stock Exchange 2021 with a market cap of $11 billion. The firm first backed the money transfer firm during Series A in 2013. The firm’s current portfolio companies also include Robinhood competitor Stash, which was valued in 2021 at $1.4 billion, and crypto exchange Bitpanda, last valued at $4 billion.
Many of its other investments are too small to call, such as Majority, a digital bank for immigrants in the US, which has done a series of Series B expansions but is, it tells TechCrunch, close to profitability.
Although Valar’s actual performance across all of its funds is not public information, so it is difficult to obtain, the company’s 2020 vintage fund is so low. -2.3% in internal rate of return (IRR), according to public records from Pennsylvania Public School Employees Retirement (PSERS), one of Valar’s LPs. But it is too early to draw conclusions about the success of this fund, which is only three years old. Private equity typically takes 10 years to mature, and that covers the venture’s particularly dismal period where valuations hit unsustainable highs in 2021 and then cratered in 2022.
Valar, named after deities in JRR Tolkien’s “The Lord of the Rings” (Thiel almost always names his companies after “The Lord of the Rings” characters), initially focused on supporting startups in New Zealand. But it quickly expanded beyond the small country to support companies based in Europe, the UK and the SF Bay Area, though at one point Valar claimed to only focus on non-Silicon Valley startups. Today he says he specializes in fintech startups worldwide.
