Peter Thiel-backed Valar Ventures closed its ninth fund on $300 million, less than half the size of its two most recent vintages, according to a regulatory filing released this week.
The fintech-focused VC firm has amassed over $2 billion of investor capital since its inception in 2010. But in recent years, its fundraising has slowed and its vehicles have shrunk.
“Fundraising today is more challenging for sure than it was a few years ago,” James Fitzgerald, a founding partner at the firm, told PitchBook via email. “That said, we were very pleased with the response we received for Fund 9, which includes some of the most sought-after LPs in the world. Raising $300 million in fresh capital—especially in the current environment—was a significant vote of confidence in our team and strategy.”
In 2021, Valar rode market tailwinds by targeting investments in fintech startups outside of Silicon Valley, with stakes in companies like Petal, N26 and Bitpanda. That year, the firm raised its largest fund to date at $863.3 million.
Over the course of the following year, the market shifted. In 2022, Valar closed a $665 million fund, nearly $200 million below its predecessor.
Fitzgerald attributed the size of the firm’s seventh fund to the fact that it merged its later-stage opportunity fund into its early-stage flagship fund. For the new fund, Fitzgerald said Valar has returned to its original structure and will focus on early-stage investments, leaving the growth rounds for other vehicles.
Shifting sands
Several of Valar’s portfolio companies have been burned by a tanking fintech market.
Petal, a consumer credit card startup valued at $800 million at its peak in 2022, was acquired via a fire sale earlier this year. Valar had poured huge sums into the startup, leading its Series A, B and C.
Valar led a 2015 Series A for digital banking platform developer N26, long before its valuation swelled to $9 billion in 2021. By 2023, one of the neobank’s backers, Allianz X, was reportedly mulling a sale of its 5% stake in N26 at a $3 billion valuation.
Valar’s successful exits include New Zealand point-of-sale provider Vend, acquired in 2021 by Lightspeed POS for approximately $350 million.
Valuations for fintech startups ballooned in 2020 and 2021 as a flood of cash poured in. But after the tech market took a turn in mid-2022, the fintech industry was hit particularly hard.
Deals slowed and fintech exit value plummeted over 75% in 2023 from the previous year, according to PitchBook’s report on the state of the fintech industry. That left specialist fintech investors in the lurch, without the cash returns needed to convince LPs to commit to new funds.
Fitzgerald and Andrew McCormack spun Valar out of Thiel Capital over a decade ago. McCormack joined Thiel’s PayPal in 2001 and helped the billionaire investor prepare the company for IPO. Before Valar, Fitzgerald worked as the chief operating officer and general counsel at Thiel Capital, where he advised on Thiel’s network of businesses and funds.
Astir Capital Advisors acted as the fund’s placement agent, according to the filing.
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