Introduction
In 2024, most fund managers are still using spreadsheets and email to run their funds. There is a certain irony that VCs funding the most innovative tech and latest AI startups are still calling LPs to make sure they have the right wire instructions (the same way things have been since way back in 1872 when the first wire transfers were sent).
Independent Sponsors who have left their high-powered PE jobs are taking their exceptional Excel skills to close $20m micro-PE deals on spreadsheets.
The real estate investor who owns half the town, still physically prints out and mails 80 pages of new deals, property info, distribution checks, and portfolio performance to his investors each month or quarter.
The first question to ask is why?
The Status Quo
The answer is, doing it old-school works (sort of). The advantages of the status quo can be perceived as:
1 | Customization: Spreadsheets offer almost infinite customization options, allowing fund managers to tailor their workflows to their specific needs and preferences, ensuring seamless integration with their existing processes. |
2 | Personal Touch: Email and phone communication enable fund managers to maintain a personal connection with their investors, fostering trust and strengthening relationships through direct engagement. |
3 | Familiarity: Fund managers and investors alike are accustomed to using spreadsheets, email, and telephone, cutting the need for extensive training or onboarding processes when adopting new platforms. |
4 | Cost-effective: Traditional methods are generally free or low-cost, as opposed to paid platforms and software solutions, making them an attractive choice for firms with limited budgets. |
5 | Flexibility: Fund managers have complete control over their processes and can adjust as needed, without being constrained by the limitations of a third-party platform. |
But here is why you might want to reconsider the status quo. Simply put, there are major advantages of leveraging a modern purpose-built investment management platform:
1 | You want to get back to being a GP: You’d rather spend your time refining your strategy, finding and evaluating deals, meeting with investors, and ultimately growing your AUM. |
2 | You want your LPs to have a great experience: Sure, if your deals are good, an investor will walk a thousand miles to bring a check to your door but what if you removed friction and made it easier and enjoyable for them to invest? |
3 | You want to protect against risks, fraud and compliance issues: Well, okay, you probably aren’t thinking about this, but you should be; both as a fiduciary responsibility to your investors and to protect your valuable reputation. |
Eliminating LP Friction
The status quo in private markets is full of friction for LPs. Sending wires. Logging into static investor portals. Receiving phone calls while you’re on vacation because your GP is trying to close the raise. Wire anxiety! It’s all a pain.
The capital raising process is often a frustrating experience for investors. It involves multiple steps, including printing documents, visiting banks, and manually initiating wire transfers or initiating multiple smaller transfers due to transfer limits. This friction can discourage investors from participating in future deals and fundraising rounds.
Lots of Annoying Steps for Investors
The status quo of capital raising is a terribly manual process full of friction for Investors. A typical process for wire transfers:
Capital call notice emailed to investor.
Investor puts it on the back burner.
“Friendly reminder” phone call to investor.
Annoyed investor puts it (back) on the back burner.
(Another) phone call reminder to investor.
Even more annoyed investor puts it on the back burner (again).
Investor finally gets around to downloading and printing the notice.
Investor needs to physically go to a bank, taking time out of their day.
Bank manually sends the wire transfer.
Wire anxiety for the investor worrying if the funds arrived
Or ACH:
Investor logs into their bank account to initiate an ACH transfer.
Investor manually inputs the bank details on the capital call notice.
Investor initiates 4 separate $25K transfers to meet the $100K capital call due to transfer limits.
Each transfer takes 3 business days or more.
Wire Anxiety
The process of sending and receiving wire transfers can be a source of significant stress and anxiety for both fund managers and investors. Concerns about wire instructions being compromised or intercepted by cybercriminals. Wired funds accidentally being sent to the wrong account. Lost or delayed transfers. The need for constant follow-ups and confirmations. These all create unnecessary friction and frustration. Emails and calls from investors ‘Did my transfer arrive?’ ‘Call me back when you get it!’ And from GPs, ‘Just confirming this is your wire?’. All this back and forth takes time and is stressful, even if nothing goes wrong.
Static Investor Portals
Outdated Investor Portals (or no portal at all) cause needless friction for your investors. Many of the legacy investor portals are clunky with outdated systems, limited functionality, and insufficient performance tracking. Many investment management companies still rely on paper-based or outdated systems instead of embracing modern solutions. These limitations can hinder efficient communication and transparency, leading to frustration among investors.
Poor user experience means that many of your investors will avoid logging in or using these systems and instead send their inquiries and document requests straight to your inbox. Prioritizing an engaging, interactive digital experience for investors is essential to encourage trust, adoption, and satisfaction while reducing the time spent with low-value customer service interactions.
Investors want to check the performance of their investments in real-time. However, most portals don’t provide comprehensive performance metrics, financial data, and historical summaries. Insufficient real-time performance tracking can lead to dissatisfaction and low engagement for your investors.
Exceeding LP Expectations
Reduce capital raise wear-and-tear with a one-click investment experience. Amazon makes it easy to buy for a reason. You swipe, and that's usually why there's a big stack of cardboard boxes at your front door every day. Consumers and investors are similar-- if you make it easy for an investor to invest, they're going to come back for more. They're going to re-up.
If you look at a tale of two funds, one that is using the old school way of just paper, pain, and effort by sending out those static capital calls, and you look at another that's using a platform like Verivend with a one-click process for their LPs to invest, which one are LPs going to choose?
If it’s low friction, low stress, and more ‘fail-safe,’ it's easier for your investors to continue investing over and over again and we haven’t even started talking about the improved trust and security you’ll be offering to your investors.
The Solution: Verivend’s Investment Management Platform
Verivend offers a comprehensive platform designed to simplify fund administration and provide a single source of truth for financial data, fund performance metrics, and task tracking. By leveraging Verivend's proprietary payments software, GPs & Investment Sponsors can:
1 | Raise & Deploy Capital Efficiently: Fund managers can prepare and send capital call notices in minutes, receive real-time status updates on their fundraising progress, and automate follow-ups and reminders, eliminating the need for manual tasks and reducing the time spent on administrative tasks. |
2 | Offer a Frictionless Investor Experience: Verivend's platform enables investors to invest with a single click, reducing friction and increasing the likelihood of repeat investments. Additionally, investors no longer need to worry about wire transfers or banking details, as Verivend's secure platform handles all transactions. |
3 | Mitigate your Risks: By maintaining a secure, auditable record of all communications and transactions within the platform, GPs and Investment Sponsors can significantly reduce the risks associated with fraud, human error, and compliance issues. Verivend's platform uses the latest security protocols, including data encryption and Multi-Factor Authentication, to safeguard sensitive information. |
It’s time to bring your dealmaking and capital raising to Verivend. Verivend is the solution that allows you to get back to being a GP, provide your LPs with a great experience, and protects against risks, fraud, and compliance issues.
We welcome GPs and Investment Sponsors at all stages of the investment journey and across all private market asset classes. Experience the immediate benefits of Verivend. You owe it to yourself and your investors. We have de-risked getting started.
Set up and market your deal, open a data room, and onboard your LPs with our institutional-grade platform today!