Scott Shleifer, Tiger Global Management’s head of private investments, is out. Founder Chase Coleman will now oversee the struggling unit, according to Bloomberg:

Months before Scott Shleifer stepped down as head of Tiger Global Management’s private investments, Chase Coleman had already begun to reclaim control of the firm’s $34 billion venture-capital arm.

Now, he’s taking over the unit that accounts for about two-thirds of the firm’s assets and has made Tiger a dominant force in startup investing. The move comes after some investors asked Coleman and other partners to get more involved in the wake of steep markdowns and has given many comfort that the firm is seeking to correct the biggest misstep in its history, according to clients.

Party Like It’s 2021

Tiger pumped a torrent of capital into late stage startups at the peak of the market in 2021. Now, the unit’s returns are suffering. Losses total nearly 40%.

“Tiger essentially was trying to deliver index-like exposure to disruptive tech companies,” said Andrew Beer, co-founder of Dynamic Beta Investments. “The irony is that their aggressive investing may have fueled the bubble and hence contributed to subsequent losses.”

As brutal as those markdowns are, they may still be too optimistic. Many major LP’s doubt today’s VC valuations.

Moving the Market

Tiger’s biggest fund tipped the scales at a staggering $13 billion. If you average the five years of venture capital investments prior to 2021, that fund would amount to about 10% of an entire year’s total.

At the late stages where Tiger invested most of its money, it formed an even larger portion of the market. Tiger didn’t just make an index — it moved the market.

Troubles with Fundraising

Paying high prices in a bubble has predictable results — big losses. Eyeing those brutal markdowns, LP’s are closing their wallets when Tiger comes calling.

Again, from Bloomberg:

As of June, [a new Tiger fund] had gathered just a third of its $6 billion target, amid a difficult fundraising environment. While the firm has had another capital raise since then, many institutional investors are limiting new VC and private equity commitments because they’re already overexposed to the asset class.

That New Year’s Hangover

Tiger was a classic venture tourist. It saw fat returns, elbowed its way into the party, and made it rain.

For a while, it works. The party keeps going, and the markups look yummy.

But sooner or later, the music stops. Everyone’s getting sloppy, and it’s time to go home.

The next day, reality sets in. “What the heck was I thinking?”

A lot of people had that experience yesterday. Tiger’s been having it for two years.

Wrap-Up

As troubled as it is, Tiger’s portfolio could find redemption. The startups keep growing and eventually exit for more than Tiger paid.

But that will take many years. The yearly rate of return, or IRR, won’t be much.

I take Tiger’s experience as a warning. I invest in solid companies at reasonable prices — hold the FOMO.

Would you invest in Tiger’s new fund? Why or why not?

Leave a comment and let us know!

Happy New Year — glad to be back!

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Photo: Tiger Global CEO Chase Coleman