Looking under the hood.
We held our 2023 LP meeting in Barcelona a few weeks ago. LP meetings are always a highlight of the year, but this was a special one. It was not only the first in-person LP meeting after three long years, but it was also an opportunity to re-celebrate the 20th anniversary of our firm (founded in 2000) with our investors in person. Writing this makes me smile, as it makes it sound like we are old, even though we are a young firm. But very few firms get this old in this business. Yes, we have had quite some successes, and challenges, over the past two decades. And we are just getting started…
The last 23 years have been wild.
6 funds, $1B AuM, 140 investments all over Europe and Israel, 6 unicorns backed at seed, of which 3 $1B+ have been exited (two IPOs and one M&A) with two more IPOs in the pipe, people on the ground in Tel Aviv, Luxembourg, Paris, Berlin, and Barcelona, 16 team members with over 10 different nationalities, and so much more.
It was also a great time to reflect on, and remind ourselves of, who we are. While many things have changed, the firm has stayed true to its DNA. People often ask me why I joined Mangrove, and my answer comes easily: The Mangrove DNA is aligned with who I am. After having been in the industry for 8 years, I can say that Mangrove’s DNA is unique: a truly international venture firm in Europe with a truly cosmopolitan culture and global worldview. And most importantly, the entrepreneurs are at the core of the firm’s universe. We do not spray and pray. We do not get overly excited when the tide lifts markets.
We stay true to our course, helping a select group of entrepreneurs build large and successful businesses. Everything we do here is to make them succeed. And we feel incredibly fortunate to have the chance to work with these ambitious and outstanding founders from the very early days on. Without them, we would not exist.
LP meetings are always one of our highlights of the year.
We do one per year in the fall. These are in-person meetings in a great location around Europe (although we also record the sessions to share with those who are unable to join). The events generally include a general update on the market and our view of the world, our funds and their performance, presentations from a representative mix of portfolio CEOs across funds and stages, presentations on some up-and-coming companies, one or two guest speakers, and a closing dinner. We take these sessions extremely seriously. We don’t turn them into fancy ‘fiestas’ but keep them small and rich in content.
This year has been all about the quality under the hood.
Of course, we covered the market environment extensively (more in this post). But, while important to navigate, market noise comes and goes. At the end of the day, the truth is in our portfolio. So, in addition to the topics we usually cover, we lifted the hood on our portfolio across funds and shared extensive data points with our LPs. Let me share with you a few elements:
1. Faster growth across the board
The % of our portfolio companies growing at >50% yoy jumped by 30% yoy.
2. Business fundamentals have improved significantly
>50% of our top value drivers are or can be profitable this year, representing 60% of the total Mangrove asset value.
3. Companies are coming out of this environment stronger than before
>10% of our companies do more than EUR 100M in annual revenues, and >40% more than EUR 10M in annual revenues. In other words, >40% have found significant product market fit.
4. Companies continue to raise at healthy multiples
Around 80% of our investments raised follow-on funding, and our most recent fund (2021 vintage) is following the same trend line despite the current market environment. The average follow-round multiples is 3.2x.
5. Healthy liquidity across funds
Our DPI across 6 funds is >1x.
6. A larger set of winners is emerging
The number of unicorns per fund (backed at the seed stage) is increasing from 1 to 2 in our latest funds.
These are pretty remarkable figures. In other words, we couldn’t be more impressed by our entrepreneurs. Many of our companies not only have the quality to survive the current environment, but to thrive in it…
We focus on substance.
We take investor relationships very seriously. Without our LPs, we would not be able to do the job we love, empowering entrepreneurs. As with our entrepreneurs, we have a ‘boutique-style’ approach:
We have a relatively small number of LPs. Why? As with our founders, we like to be ‘all-in’ and available anytime. A smaller investor group means that we can pick up the phone with them or meet with them in person anytime to exchange thoughts on market trends or to discuss the good and the not-so-good news. We are partners.
We are loyal to our LPs. We are thinking in terms of decade+ relationships and investing time in those. Many LPs have been with us since the start of the firm in 2000. We generally offer the opportunity to invest with us fund after fund.
We believe in substance, frequency, regularity, and transparency. There are many other ways to handle investor relationships; some hire dedicated IR people, others focus on returns only and not so much on sharing information along the way. Our style are strong and direct relationships.
Last week I was in Lisbon. I was invited to attend some conferences, including Websummit. I didn’t attend the latter. Most of my friends did not either. It was great to catch up with them regardless. It will be interesting to see what new conference will emerge out of this. I am sure there will…
Life is awesome
European VC Europe