After a Series of Setbacks, Venture Capital's Big Spender Temasek Shifts Strategy
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After a Series of Setbacks, Venture Capital's Big Spender Temasek Shifts Strategy
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Navigating Web3 tides with focused insightsAuthor: Zhang Yaqi, Wall Street Insights
After suffering major losses from investments in FTX, eFishery, and others, Temasek Holdings of Singapore has sharply reduced its investment scale—from $4.4 billion in 2021 to just $509 million last year, with only $70 million invested so far this year. Amid high interest rates, the firm is shifting focus toward a smaller number of late-stage companies closer to going public.
When one of the world’s largest sovereign wealth funds begins pulling back from early-stage ventures, the deep freeze across the venture capital ecosystem may be only beginning.
Following a series of painful missteps including FTX and eFishery, Temasek Holdings is scaling back its startup investment portfolio at an unprecedented pace: its annual investment volume plunged from $4.4 billion in 2021 to $509 million last year, and stands at just $70 million to date this year.
Even more striking, the number of first-time investments it made dropped from 82 in 2021 to merely 11 last year—indicating that this giant fund, managing $300 billion in assets, has nearly completely withdrawn from the early-stage venture game.
According to a report by the Financial Times on April 4, insiders at Temasek said fund managers believe rising global interest rates have made it harder for startups to raise capital and diminished their chances of going public. A fund manager familiar with the group's investment strategy told media:
"Temasek's portfolio has taken considerable hits in recent years. They are changing their strategy to achieve greater diversification and reduce return volatility."
Missteps Galore: Painful Lessons from FTX to eFishery
Temasek’s strategic shift is not baseless—it comes from costly, real-world failures. When cryptocurrency exchange FTX filed for bankruptcy in 2022, Temasek was forced to write off a $275 million investment. As one of FTX’s largest backers, Temasek joined firms like SoftBank and BlackRock as victims of what became the biggest fraud in crypto history.
The fallout extended beyond financial loss. Heng Swee Keat, then Singapore’s finance minister (now senior minister), publicly stated the investment had damaged reputational standing. Temasek subsequently imposed pay cuts on its investment team and senior executives.
Even more shocking was the collapse of Indonesian agritech firm eFishery. The startup, which developed automated feeding systems for fish and shrimp farming, was exposed for allegedly falsifying sales and profit figures. In April, media reports revealed that one of eFishery’s co-founders admitted to fabricating numbers in company financial statements.
Temasek’s list of failed bets also includes Singaporean e-commerce firm Zilingo, gene therapy company Locanabio, Boston-based Pear Therapeutics, and biotech firm Tessa Therapeutics.
Forced Transformation in a High-Interest-Rate Era
Temasek’s investment team clearly identifies the central challenge of today’s market: rising global interest rates over the past few years have made it significantly harder for startups to secure funding and severely undermined their paths to IPOs. This funding crunch has also exposed underlying weaknesses in several prominent startups.
Under its revised investment framework, Temasek will continue investing in startups indirectly through venture capital funds, but its direct investments are now concentrated on fewer, later-stage companies closer to public listing. Currently, early-stage investments make up only 6% of Temasek’s overall portfolio, with about half allocated via direct investments and the remainder through VC funds.
Temasek’s strategic pivot also reflects mounting pressure from its overall performance. The fund has struggled to keep pace with global equity markets in recent years: it posted a mere 2% return for the fiscal year ended March 2024, compared to the S&P 500’s 28% gain; the prior year saw a negative return of 5%.
Established in 1974 to manage the Singapore government’s stakes in major domestic enterprises, Temasek has evolved over the past two decades into a global investor. Today, privately held companies account for slightly more than half the value of its $300 billion portfolio.
In a statement, Temasek acknowledged the new market reality:
"We have observed a correction in market investment flows into early-stage companies since 2022, leading us to adopt a more cautious approach toward new investments."
Although Temasek has had successful early bets such as Alibaba, Dutch payments firm Adyen, U.S. food delivery company DoorDash, and Indian conglomerate Eternal (owner of Zomato), it is clear that even the most seasoned institutional investors are opting for caution under current market conditions.
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