Dealroom’s 2023 VC ranking is out. Luxembourg-based VC Mangrove Capital Partners is in the top 50 globally, top 10 in Europe, and number 1 in Benelux. Yannick Oswald, Partner at Mangrove Capital, speaks in his blog post shared below about the fact that this is a testimony to the great founders the company is working with.
These rankings are always a great opportunity to first say ‘thank you’ to our founders. I love this job, and the privilege to support our founders 24/7 to change the world for the better.
The pros and cons of VC rankings
The Dealroom ranking is one of the few rankings we take seriously. Having spent some time with the team at Dealroom and knowing the effort they put into this research, I really appreciate their work’s quality. There is always bias in these sort of rankings (more below), but I know the team at Dealroom goes the ‘extra mile’ to ensure that the metrics they focus on are accurate.
I love the praise, but VC rankings should be taken with caution. Why? While they give a good overview of which firms have their nose in the good ‘deals’, there are always a few important natural biases in them. It is just impossible to compare very different investment strategies, fund sizes, etc., based on one or two metrics only (number of billion-dollar companies a firm invested in in this case) and have a full picture of the underlying performance. In our case, we have a ‘low volume (of deals), high conviction, high support approach’. In other words, we have fairly concentrated portfolios. So, when we invest, we are ‘all-in…’. The opposite of this investment approach at seed (the stage we focus on) is ‘spray and pray’, meaning having a large amount of investment lines with less ownership in those lines. Both are interesting strategies, but they require very different skill sets and founder relationships.
Our hit ratio (ratio of # of billion-dollar companies vs. total investment lines) is somewhere between 6% and 10% (aligned with Dealroom’s data) and has worked very well for us and our model. Having many of these outliers in a portfolio is great, of course. But, without a view on ownership, this data point doesn’t mean much for a decently sized early-stage fund. In other words, I prefer to have 15-20% in one billion-dollar plus outcome vs. 2-3% in 4 unicorns on whose trajectory I have little to no influence on. This is simple math and control management. Discipline is all that matters in the investment world.
Luxembourg in the top charts
It is great to see the Luxembourgish country flag that high up in the ranking. At Mangrove, we invest all across Europe and Israel; borders don’t matter. This approach and thinking is deeply anchored in our DNA. It is linked to our Luxembourg origins and home base. Being from a small country like Luxembourg and growing up quadrilingual makes travel inevitable, and borders fade. To see ‘us’ appear at the top makes me proud. Yes, we are very tiny, but we like to show the big guys who we are.
Blog by Yannick Oswald