There’s a prevalent belief in Silicon Valley that every investor would jump at the chance to partner with Peter Thiel. However, the venture capital fundraising climate has become so challenging that even Valar Ventures, a VC firm he co-founded, has secured a significantly smaller fund this year compared to previous ones.
Thiel established Valar in 2010, appointing Andrew McCormack and James Fitzgerald to manage it. Both had previously been associated with Thiel’s family office Thiel Capital and Clarium Capital Management, the defunct hedge fund Thiel founded. It’s uncertain how involved Thiel is with Valar today, as his name has not appeared on the firm’s website alongside the team’s partners 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 substantial amount, it is less than half of its predecessor, which closed at $665 million in July 2022. In late 2021, Valar raised over $863 million for its Fund VII, according to SEC filings.
Valar is not the only firm aiming for smaller funds amid a tougher fundraising market for venture capital—despite the high-profile names involved. Tiger Global raised 63% less than its initial target in its latest fundraising. Insight Partners also reduced its fundraising goal last year. Founders Fund, considered Thiel’s most prestigious VC firm, cut its eighth venture capital fund’s target in half in 2023, from around $1.8 billion to approximately $900 million, although this was reportedly for strategic reasons rather than due to the fundraising environment. Concurrently, it raised 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 Truth Voices in an email. However, he did not respond to questions about Valar’s current relationship with Thiel.
Meanwhile, other funds with notable names are thriving in their fundraising efforts. This month, ICONIQ Growth successfully met its $5.75 billion target for its seventh flagship growth fund, up from $3.75 billion for its sixth. ICONIQ Growth is the late-stage investment unit of ICONIQ Capital, which serves the private office of tech luminaries such as Mark Zuckerberg and Jack Dorsey. Additionally, Wells Fargo once again backed Norwest Venture Partners with $3 billion for its 17th vehicle, as reported by Truth Voices last month.
Whether or not Thiel remains involved, limited partners (LPs) might not be as enthusiastic about Valar’s latest fund as they once were.
“They’ve raised too many funds without returning sufficient capital to investors,” said an LP who wished to remain anonymous. “Their actual return on capital has been very low. I would even say outright poor.”
Like any VC firm, Valar has had its share of disappointments. The firm invested in cryptolender BlockFi, which filed for Chapter 11 during the crypto winter of 2022. It also invested in Breather, a workspace-on-demand provider that raised $127 million but sold its assets for just $3 million in 2021.
Valar backed the German insuretech company Coya, which raised a total of $40 million before being acquired by the French-based insurance startup Luko in an all-stock deal in 2022. A year later, Luko, having raised about €72 million in funding, was placed in receivership and then sold to Allianz for €4.3 million earlier this year.
Valar’s most significant success to date appears to be Wise, which debuted on the London Stock Exchange in 2021 with a market cap of $11 billion. The firm was an early supporter, backing the money transfer company during its Series A in 2013. Other portfolio companies include Robinhood-competitor Stash, valued at $1.4 billion in 2021, and crypto exchange Bitpanda, last valued at $4 billion.
Many of Valar’s other investments are still too young to evaluate fully, such as Majority, a digital bank for U.S. migrants, which has completed several Series B extensions and is reportedly close to profitability.
Valar’s overall performance across all funds remains undisclosed and hard to assess. However, the firm’s 2020 vintage fund shows a -2.3% internal rate of return (IRR), according to public records from Pennsylvania Public School Employees Retirement (PSERS), one of Valar’s LPs. However, it’s premature to judge the fund’s success as it is only three years old. Private funds typically mature over ten years, and this one covers a particularly challenging period in venture capital, with valuation peaks in 2021 followed by sharp declines in 2022.
Originally named after deities in J.R.R. Tolkien’s “The Lord of the Rings” (Thiel frequently names his companies after characters from the series), Valar initially focused on startups in New Zealand. However, it quickly expanded to support companies based in Europe, the UK, and the San Francisco Bay Area, even though at one point Valar claimed to focus solely on startups outside Silicon Valley. Today, it says it specializes in fintech startups worldwide.
