The perception in Silicon Valley is that every investor would love to be in business 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, has raised a much smaller fund this year compared to previous ones.
Thiel set up Valar in 2010 and appointed Andrew McCormack and James Fitzgerald to run it. Both previously worked at his family office Thiel Capital and at Clarium Capital Management, the now-defunct hedge fund Thiel founded. It’s not clear how much involvement Thiel has in Valar these days. His name hasn’t been listed on the firm’s website among the team’s partners in many years.
The New York-based firm has successfully raised a $300 million Valar Fund IX, according to a May 17 SEC filing. While that’s a decently sized fund, it is less than half of the predecessor, which closed on $665 million in July 2022. Valar raised over $863 million in late 2021 for its fund VII, according to SEC filings.
Valar isn’t the only firm to target less money for its latest fund amid a tougher fundraising climate for venture funds — regardless of the notable names attached to them. Tiger Global raised 63% less than its original target in its latest fundraise. Insight Partners also reduced its fundraising target last year. And Founders Fund, arguably Thiel’s most prestigious VC firm, slashed the target of its eighth venture capital fund in half in 2023, from around $1.8 billion to around $900 million, although it reportedly did so for strategic reasons, rather than in response to the fundraising environment (and it also simultaneously did raise a $3.4 billion second growth fund, Axios reported.)
“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 didn’t respond to TechCrunch’s question about Valar’s current relationship with Thiel.
Then again, other funds with big names attached to 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, up from $3.75 billion for the sixth one. ICONIQ Growth is the late-stage investment unit of ICONIQ Capital, the private office of some of tech’s most prominent people, including Mark Zuckerberg and Jack Dorsey. And Wells Fargo again backed Norwest Venture Partners with $3 billion for its 17th vehicle, TechCrunch reported last month.
Whether or not Thiel is still involved, LPs may just not be as excited about Valar’s latest fund as they once were.
“They raised too many funds and haven’t returned enough capital to their investors,” said an LP who asked to remain anonymous. “Their actual return on capital to investors has been very low. I would say outright poor.”
Like all VC funds, Valar has had its share of misses. The firm bet on cryptolender BlockFi which filed for Chapter 11 amid the crypto winter of 2022. Valar invested in Breather, which provided workspace on demand. After it raised $127 million, it sold its assets for mere $3 million in 2021.
Valar also backed German insuretech Coya. After raising $40 million in total funding, Coya sold to French-based insurance startup Luko in an all-stock deal in 2022. Then, a year later, Luko, which had raised about €72 million in funding, was placed in a receivership and finally sold to Allianz for €4.3 million earlier this year.
Valar’s biggest success so far appears to be Wise, which debuted on the London Stock Exchange in 2021 with a market cap of $11 billion. The firm first backed the money transfer company during its 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 young to call, like Majority, a digital bank for US migrants, which has done a series of Series B extensions, but is, it tells TechCrunch, close to profitability.
While Valar’s actual performance across all of its funds is not public information, therefore difficult to obtain, the firm’s 2020 vintage fund is so far down -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’s too soon to draw conclusions on the success of this fund which is only three years old. Private funds typically take 10 years to mature, and this one covers the particularly awful period in venture where valuations hit unsustainable highs in 2021 then cratered in 2022.
Valar, named after deities in J.R.R. Tolkien’s “The Lord of the Rings” (Thiel just about always names his companies after “The Lord of the Rings” characters), was initially focused on backing startups in New Zealand. But it quickly expanded beyond the small country to back companies based in Europe, the UK, and the SF Bay Area, even though at one point Valar claimed to focus only on startups outside Silicon Valley. Today it says it specializes in fintech startups worldwide.
