Technology Crossover Ventures: Playing the Private and Public Markets to Optimize Returns

Palo Alto, Calif.-based Technology Crossover Ventures (TCV) provides growth-stage capital to private and public companies in the technology industry. The investment firm, founded in 1995, has allocated over $9 billion in high-flying tech companies such as Genesys Software, Airbnb, Zillow, Expedia, Facebook, Dollar Shave Club, GoDaddy and Netflix.

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In August 2016, the firm raised $2.5 billion for its ninth and latest growth fund, marking the tenth largest in venture-investing history, according to market tracker Dow Jones VentureSource. Its Fund VII closed in 2007 at $3 billion, which has been estimated to have produced an IRR of ~22%, while its eighth fund totaled $2.3 billion.

TCV’s unique approach to investing in both the private and public tech sector gives it the leeway to shift its strategy depending on how the market is performing.

“We want to invest in the best companies,” said TCV’s founding general partner Jay Hoag. “Most often they’re private. But sometimes values become compelling on the public side.”

TCV has made public investments in companies that it previously backed while they were private, including Wall Street darling Netflix, which it first backed in 1999 and Zillow Group, which it first funded in 2005. Last year, the investment firm generated a fast return on LinkedIn before it was acquired by Microsoft Corp. for $26.2 billion.

Over the past few years, TCV has focused more heavily on its European investments, targeting companies such as Spotify, Believe Digital and NewVoiceMedia. As the firm saw valuations skyrocketing in the private market over the past few years, it often looked to bootstrapped companies outside of Silicon Valley. Out of 24 investments made in 2014 and 2015, only one was in Silicon Valley, while the rest were in areas such as St. Louis, Boston, Atlanta and Tulsa.

Some of TCV’s notable exists in the past year include Danish software provider Sitecore A/S, which it sold a majority stake to EQT for $1.2 billion; TechTarget Inc., a public company which TCV initially backed when it was private; and Genesys, which sold a $900 million stake to Hellman & Friedman.