Chris Wade is a co-founder and Partner at Isomer Capital, a London-based LP investor with top European VCs like Seedcamp, Hoxton Ventures, and Entrepreneur First in its portfolio, recently visited Warsaw to participate in Vestbee’s CEE VC Summit. During the event, we conducted a series of video podcasts with founders and Partners from global most active funds, and we’re excited to share the initial episode.
In this episode, Chris and Marcin Łączyński, Chief of Investments at Vestbee and General Partner at Next Road Ventures, engaged in a discussion offering valuable advice for emerging GPs. They covered topics such as effective self-presentation, case building, and cultivating relationships with LPs. Here, we share the main highlights from their conversation. You can watch the entire discussion below.
I would like to start with the key considerations when you were evaluating an emerging GP. What are the traits and factors that you take into account when looking at a fresh team?
Three things, it's very simple:
- Do we believe that this team will give us the financial return that our investors require and why they invested in us?
- Are they doing something slightly different? Whether that's geography, whether that's sector, whether that's stage, just creating a bigger portfolio, a more diverse portfolio for us?
- And finally, can we be partners with them?
We are significantly more than just an LP check — we are someone who wants to sit on the limited partner advisory board; we want to talk to them regularly about co-investments, secondary transactions, and just generally be there when a manager has a tough moment, or be there to celebrate when they have a wonderful moment. So partnership is really important to us.
Looking at the first time teams, do you think that there is a special kind of LP that they should turn to first?
Clearly an important question before meeting an LP is would they consider an emerging manager? We're very comfortable with it. We do a mix of emerging and second, third funds, and we've done funds in Fund VI. But it is important to understand because the simple way to think about it is the LP has to do more work on an emerging manager, which we're very happy to do, but not all are.
How do you evaluate emerging GPs without prior track record?
Well, everybody's got a track record. That's the secret to this. And so what are we looking for? For that core critical mass of entrepreneurship within the team, within the manager.
Is there evidence that he or she has been entrepreneurial in their journey? Now, they may not have been entrepreneurs. They just may have done something amazing in a corporation, or they may have done something amazing in another part of their lives. But is that innovation and is there core entrepreneurship that this team has, that's what we're looking for, that critical mass of entrepreneurship.
And you find that in many, many ways in all the managers that we've backed.
From your perspective, looking at young teams, is there a preferred size of a fund that you would back?
It depends on what you're doing. But on the basis that turning 20 million or 30 million into, into 60 or 90 million is a downside easier than doing it bigger.
I think having a small target is good. It's really tough to fundraise when you're a first time manager. We've backed a lot of 20 and 30 million managers, and that's great. Let them figure out the strategy. Let them implement the strategy, make course corrections. And they can probably do well because of the size of the fund.
Before, there was a hype for generalist funds. Right now, the CEE markets are relatively shallow compared to the Western ecosystems. In terms of the focus, do you have any preference or any advice that you can give?
I don't think it really matters. What does matter is that the team has the skill set to match the focus. That is the really important point. If you're saying you're going to be a generalist, why are you going to be better than anyone else that's doing this area? Is there a certain type of entrepreneur or is there a certain business model or sector that you're going to really sort of focus on to be the best in that market?
Remember, you need to get into a few deals that will make a fundamental change to your company performance. And those deals may be hard to get into.
You've been active in the CEE for a number of years. But if there are not many other LPs like yourselves, what needs to happen, to raise their interest when I'm a fund manager, based out of Poland, Romania, Czechia or Hungary?
When an LP signs that subscription agreement to your fund, you're signing up for probably a 10 plus 2, maybe 3, and in some cases longer relationship. So this is not a “I meet this person, and they're going to give a check.” This is a long term thing.
We value the persistence of some emerging managers to keep knocking on our door until we listen. So persistence and going out there and as you would expect the entrepreneurs that you back do to you.
The final question is related to your advice to fund managers, their exit and distribution to LP strategy. What was in your opinion the right way to do it?
Do it. It's the real answer.
We talk about investing or the venture capital business model as a model of two halves. One is finding great companies to back. The second half is realizing that investment and returning capital to LPs. And we think that as Europe matures, that sort of distribution is going to be more and more a focus of managers and sorry to LPs and that's what you need to focus on.
The real interesting insight here is that it does not mean selling your “crown jewels” early. It means selling 10% and just to get the idea of sending money back to your investors. It doesn't have to be very much, but you're proving that you understand the business model of VCs and LPs.
