Insight Partners cuts size of $20 billion fund and warns of ‘great reset in tech’

Insight Partners has slashed the $20 billion target for its latest fund, saying dealmaking will slow after nearly a year of glacial funding as technology valuations plummet.

The New York-based venture capital firm, one of the largest technology growth investors in the US with $90 billion in assets, has raised just over $2 billion for its 13th fund, which first opened to investors last June I went.

In a letter to institutional investors on Monday, Insight Partners warned its investors that it was witnessing “a great reset in tech” as a result of a sharp drop in public company valuations that has hurt the value, number and quality of start-ups. had influenced in which he can invest.

As a result, Insight said it would reduce the size of its latest fund to $15 billion. It also said it expects to slow the pace at which it deploys its existing funds to an average of two years, despite historically being much faster than many of its peers. InSight has less than $10 billion of “dry powder” – money it has raised but not yet deployed.

“Insight” isn’t seeing the amount of companies that (it) are excited about, said a person close to the fund.

Insight is considered a bellwether for venture capital and technology investment. An investor based in New York said it encountered difficulty raising its latest fund, underscoring the sector’s challenges. “It’s a bloodbath,” said the man.

Institutional investors such as pension and endowment funds have held back on investing in the private markets as interest rates have risen and valuations of technology companies have stagnated.

Venture capital funding soared to record levels during the pandemic, with funding totaling $159 billion in 2021 and $171 billion in 2022, according to PitchBook. But it collapsed in the last six months, and US venture funds raised just $12 billion in the first quarter of this year.

Insight was one of the busiest investment firms in 2021 when technology valuation and dealmaking boomed, participating in deals valued at a total of $25bn, including large fundraising rounds of over $500mn in Transmit Security and NewvemShop, according to Crunchbase. However, the number of venture and private equity rounds Insight participated in fell by a fifth to 199 from 243 deals last year, and the total amount of deals dropped to $14.4bn, Crunchbase data showed.

“The sharp fall in valuations has reset the market in a very positive way,” said Insight’s note to investors. “In 2021, we saw extraordinary growth in technology demand, but challenging valuations and a lack of discipline around cost structures and cash burn rates. We believe the great reset has solved two of those challenges.”

Insightly has invested heavily in fast-growing software companies in recent years, especially as valuations rise in 2020 and 2021.

Last year, it invested in a $1 billion fundraising round for payments processor Checkout.com, which valued it at $40 billion, and in a $690 million round for Singapore-based Coda Payments, which valued it at about $2.5 billion. The company led Jasper’s $125mn Series A funding round last year, which valued the artificial intelligence chatbot company at $1.5bn. Other major investments include HelloFresh, Calm, Delivery Hero, Twitter, and failed crypto platform FTX.

However, it is exposed to a painful reversal in technical valuations that has occurred over the past 18 months.

Insight has invested about $14 billion in its 12th fund, which closed last year after raising $20 billion, said a person close to the company.

“They deployed very aggressively in a very short period of time . . . at extreme prices,” said a US venture investor whose firm researched an investment with Insight. “They are smart people who got swept up.”

An advisor to private market investors based in the US compared Insight to Tiger Global, Chase Coleman’s investment fund, which has written massive checks for start-ups at the top of the market in recent years.

“Both Insight and Tiger were very active and aggressive in the go-go era,” said the person. “Insight chose their locations very strategically. . . everyone who was very active in late-stage ventures in 2020 and 2021 will lick some wounds, but Insight’s process was much more robust.

Additional reporting by Evan Levingston and William Louch