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Case Study

Israel Secondary Fund (ISF): Completing venture capital in the start-up nation

By Benoit F. Leleux, Ilya Altukhov, Elfie Bogaerts, Madalina Manoiu, Jörg Schüttrumpf and Norman Wijeyratne

17 pages

December 2022

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Reference: IMD-7-2408

The case documents the genesis and development of Israel Secondary Fund (ISF), an innovative venture capital secondary fund operating in Israel, a country dubbed “the start-up nation” for its very dynamic technology sector, in particular in leading-edge applications such as drones, cybersecurity, avionics, advanced materials, software, etc. It offers an exciting exploration of the inner workings of the Israeli venture capital industry through the eyes of a pioneer of its secondaries market. To operate effectively, secondaries funds need to master all dimensions of the industry, facilitating deals and providing liquidity between general and limited partners. The brainchild of two pioneers of Israel’s nascent venture capital industry, ISF was launched in 2008 and grew to become the second-largest Israeli secondary fund, with a focus on technology. In February 2021, the fund sold one of its most significant positions, an investment in MyHeritage, generating exceptional internal rates of return for the fund and validating the fund’s original business model of providing valuable liquidity to the country’s venture capital industry. But the exit brought about new strategic questions: Was the original business model adapted to the new post-pandemic environment? What adjustments could they make to increase the attractiveness of the vehicle to global institutional investors? What would be the optimal size of the next fund to be raised soon, ISF III? What else could be done to facilitate the fund manager’s scaling up?

Learning Objective

Explore the venture tech market in Israel from a secondary fund perspective.
Understand the key protagonists in the market and explore their interests and motivations.
Investigate the value proposition of ISF’s funds and suggest improvements.

Keywords

Entrepreneurship, Venture Capital, Finance, Strategy, Private Equity, Secondary Equity Offering, Start-up Financing, Liquidity, Asset Allocation

Settings

Israel
Israel Secondary Fund, Finance and Insurance, Venture Capital, Finance and Insurance, Private Equity
2020-2022

Type

Field Research

Available Languages

English

Related material

Teaching note, Video

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