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Spotify, Netflix and Airbnb investor TCV has raised $3bn to target start-ups as the US group pushes to take advantage of lower valuations and less rivalry three years on from the peak of a tech investing boom.
TCV attracted new investors from Asia, the Middle East and Latin America as well as others in the US and Europe for its 12th fund. It plans to invest more than half of the fund in North America and the rest in Europe.
“Technology investing is always competitive,” said John Doran, who co-runs TCV. “That being said, the irrational behaviour we saw really ratchet up in 2021 has gone. We saw hedge funds and venture capitalists try their hand at growth investing and they are largely gone,” he added.
Investment into tech start-ups has eased since 2021, as rising interest rates and geopolitical uncertainty have prompted many to retreat from the risky sector. Globally, venture capitalists raised $555bn in 2021. Last year, they raised a third of that total, according to PitchBook.
TCV writes cheques for larger start-ups that have proven they already have a viable business, and often just a year or two before the companies go public.
Backing an established business gives TCV a higher chance of successfully cashing out its bets, albeit at a lower multiple return on investment compared with earlier-stage venture capital firms. This more conservative approach has positioned the firm well as the venture market has eased since 2021, according to Jay Hoag, the company’s founder.
“The world has come our way,” Hoag said. “In 2021, a hedge fund would have a Zoom call and commit to an India deal in the morning, a China deal at lunch and a US deal in the evening,” he added. “There was no diligence. That’s gone.”
TCV, which has around $21bn in assets under management, has backed a number of high-profile tech companies in the US and Europe, including Expedia, Instacart and Klarna.
In November the firm committed to its first investment from this fund, partnering with large private equity groups including Blackstone, General Atlantic and Permira on the €14bn buyout of Norwegian online classified ads business Adevinta.
TCV has continued to supply limited partners — the institutional investors, endowment funds and foundations that supply its capital — with regular liquidity during a punishing few years for venture investors, Hoag said.
“We have had 14 straight years of generating more than $1bn” for limited partners, he said. “The total liquidity since 2020 is $11bn, which is more than we’ve invested. That’s relevant for our investors.”