Insight Partners slashed its $20 billion target for its latest fund and said it would slow the pace of deals after nearly a year of slow fundraising as technology valuations slump.
The New York-based venture capital firm is one of the largest tech growth investors in the U.S., with $90 billion in assets, but has raised only about $2 billion for its 13th fund, which made its first investment in the company last June. Those who sell.
In a letter to institutional investors on Monday, Insight Partners warned its investors that it is witnessing a “big tech reset” as a sharp decline in public company valuations affects the value, volume and quality of U.S. startups. It can be invested.
As a result, Insight said it would trim the size of its latest fund to $15 billion. It also said that while it has historically deployed existing funds much faster than many of its peers, it expects to slow down the deployment of existing funds by an average of two years. Insight has nearly $10 billion in “dry powder” — money it has raised but has yet to deploy.
Insight “didn’t see the number of companies it was excited about,” said a person close to the fund.
Insight is regarded as the vane of venture capital and technology investment. One New York-based investor said its difficulties raising its latest fund underscored the industry’s challenges. “It was a massacre,” the person said.
As interest rates rise and tech company valuations stagnate, institutional investors such as pension funds and endowments have reined in investments in illiquid private markets.
Venture capital funding has soared to record levels during the pandemic, with companies raising a combined $159 billion and $171 billion in 2021 and 2022, according to PitchBook. But that has collapsed over the past six months, with U.S. venture funds raising just $12 billion in the first quarter of this year.
Insight was one of the busiest investment firms in 2021, according to Crunchbase, at a time when tech valuations and dealmaking were booming, taking part in deals totaling $25 billion, including more than $500 million in Transmit Security and Nuvemshop. Lead funding round. However, the number of venture capital and private equity rounds in which Insight participated fell by a fifth last year, from 243 to 199, with deals totaling $14.4 billion, according to Crunchbase.
“The sharp drop in valuations has reset the market in a very positive way,” said Insight’s note to investors. “In 2021, we see exceptional growth in technology demand, but challenging valuations and a lack of discipline in cost structures and cash burn rates. We believe the Great Reset has addressed both challenges.”
Insight has invested heavily in fast-growing software companies in recent years, especially as valuations soar in 2020 and 2021.
Last year, it led a $1 billion round for payments processor Checkout.com at a $40 billion valuation and a $690 million round for Singapore-based Coda Payments at a valuation of about $2.5 billion. . The firm led Jasper’s $125 million Series A round last year, valuing the artificial intelligence chatbot company at $1.5 billion. Other major investments include HelloFresh, Calm, Delivery Hero, Twitter and failed crypto platform FTX.
However, it faces a painful reversal in technical valuations that has occurred over the past 18 months.
Insight has deployed about $14 billion of its 12th fund, which closed last year after raising $20 billion, people close to the firm said.
“They’re deploying very aggressively in a very short period of time . . . at top price,” said a U.S. venture investor whose firm explored an investment with Insight. “They’re dazzled smart people.”
An adviser to U.S. private-market investors compared Insight to Chase Coleman’s investment fund, Tiger Global, which has written a string of big checks for top-of-the-market startups in recent years.
“Both Insight and Tiger are very active and aggressive in the go-go era,” the person said. “Insight picked their position more strategically . . . Everyone who’s been very active in late-stage VC in 2020 and 2021 will lick some wounds, but Insight’s process is much more robust.”
Additional reporting by Ivan Levingston and William Louch