London investment firm Isomer Capital is raising its first dedicated secondaries fund of £100m.
So far, Isomer — best known for its VC fund of funds — has closed over 20% of the fund, with LPs including several Nordic family offices and a German foundation.
“The European venture capital secondaries market is set to explode over the coming years,” says Joe Schorge, managing partner at Isomer, given the record number of private tech companies in Europe at the moment — and the VC liquidity crunch.
“The need for liquidity has never been higher, and solutions are few and far between. So it’s a great time to buy for those with access, analytics and capital to deploy.”
The secondaries fund will primarily buy stakes in VC funds, but will also buy stakes in a small number of private companies. It’s currently working on two deals, which it hopes to close this month.
Isomer has invested in over 80 European VCs to date, including Seedcamp, Kindred, OTB, Entrepreneur First, Frst and Atlantic Labs, and has 32 unicorns in its underlying portfolio.
The opportunity
This isn’t Isomer’s first foray into the secondaries market. The firm, which has raised three funds of funds to date — most recently in 2023 — has in the past done several secondaries deals with portfolio companies and VC firms, including early-stage VC Seedcamp (in 2021) and mobility giant Bolt (in 2023).
However, until now, it’s been limited by the number, size and type of secondaries it could do from its fund of funds. With its new secondaries fund, it is open to buying secondary stakes in any Europe-based fund or startup, regardless of whether it’s invested in them before, writing cheques of €1-10m.
Omolade Adebisi, who previously worked in private equity secondaries at Coller Capital, a global leader in the field, has joined Isomer as a principal to work on the fund.
She says around 65-75% of the new fund will be used to buy “LP interest” stakes in VC funds from existing LPs.
A further 15-25% of the fund is earmarked for direct secondaries in companies, with the remaining 0-15% left to do “what we like” with it.
That could mean buying stakes in funds or carry from general partners. “Many European VCs haven’t made money [from their deals yet],” says Adebisi. “So if they need to buy a new home, or want to send their kids to private school, or are raising a new fund and need GP commitment…[they might want to sell a stake in an older fund].”
Pricing VC funds is a complex art, says Adebisi. It involves looking at the underlying assets in a VC’s portfolio, considering financial performance and management, asking yourself whether you believe in a company’s current valuation or not, and assessing what that valuation could be at exit, when that exit might be, and how it might happen.
Buying a stake in a company at a huge discount from the last round does not necessarily mean you’ve got a great deal if the company is a mess. She says it’s all about asking: “Am I buying a quality product at the right price?”
As a result, VC secondaries are trading at everything from a 25% to 60% discount.
Isomer’s hoping for returns of 2-3x from the fund, with many distributions coming in the next four to seven years.
The competition
VC secondaries deals are still few and far between in Europe, says Adebisi — and competition for them is rare.
“There was nobody else looking at the deals I’ve closed,” she says — from the flagship fund of funds. “It was just us going in and saying, ‘Would you like us to do this?’”
“A lot of people are doing directs rather than LP interest,” she adds; TempoCap, one of Europe’s best-known secondaries players, is primarily focused on buying stakes in startups.
This lack of competition is holding the market back, Adebisi says. “To get the market flowing, you need competition. I’m hoping that more players come in.”
In her view, there’s also too much focus, from VCs and startups alike, on exits via M&A or IPO. “It needs to be secondaries, M&A and IPO,” she says.
“The way VCs think about monitoring the portfolio… liquidity distribution and portfolio management is not on their mind. They’re thinking about calling up a founder, not thinking about how they’re delivering to LPs. I would love to see more of that.”
