The Size Curse
A big part of my job is speaking to other VC investors. I do it to find new opportunities, to chat about the market, to refine investment theses, and generally to compare notes on how to play this game.
Today I was speaking with a good friend from one of the biggest European multi-stage funds. They manage >€1bn and have a specific mandate, due to the composition of their LP base, to invest the majority of it into European companies.
As a manager of a small fund often feeling very much under-resourced, that sounds like a great position to be in. But the more I spoke to him, the more it sounded like a bit of a curse.
The core problem is that they can only invest in things that have the path to being a $5-10bn outcome. In other words, they can only take the massive swings and hope to hit it big. That fund size requires whales. And the reality is, there aren’t that many of those in Europe.
I’m not saying I wouldn’t want a bit more firepower, but the pressure of returning $3-5bn net back to LPs with European venture alone as the fishpond is a daunting prospect. Maybe there is such a thing as a size curse in the opposite direction than I’m used to thinking about it.
Maybe the grass isn’t always greener on the other side.