Podcast Summary
Democratization of Institutional-Level Investing: Pass Thru simplifies fundraising for GPs through software, enabling easier investor onboarding and subscription tracking in the democratized world of institutional investing.
The world of investing is becoming more accessible to individuals as institutional-level investment models and infrastructure are democratized. This trend is driven by both a pull from new fund managers with their own networks and a push from regulatory changes allowing individual investors to access private funds. Tim Flannery of Pass Thru discussed this phenomenon and how it has led to an increase in demand for simplifying the complex and time-consuming fundraising process. Pass Thru's software aims to streamline investor onboarding and subscription tracking, making it easier for GPs to manage their fundraises. Additionally, the conversation touched upon the importance of identity as a feature in building products and the challenges of pricing in the unsexy but necessary market of solving frictions in the investment world.
Streamlining the Investment Process: Historically, efforts have been made to reduce frictions in investing, but manual verification and compliance processes remain barriers to a fully frictionless investing world. The ideal future state involves centralizing and securing investor information to give them more control and ease in the investment process.
The ideal future state of investing involves reducing frictions and giving control back to investors. This can be achieved by centralizing and securing investor information, allowing them to easily access and use it for investment purposes. The current process, which often involves manual verification and lengthy questionnaires, can deter potential fund managers and slow down the investment process for both emerging and established firms. Historically, there have been significant steps towards reducing frictions in investing. For instance, the Jobs Act and platforms like AngelList have made it easier for private companies to raise capital and for investors to access these opportunities. However, there are still barriers to a fully frictionless investing world, such as the need for manual verification and compliance processes. The ultimate goal is to create a seamless investment experience, allowing fund managers to focus on what they do best – making good investments – while giving investors more control and ease in the investment process.
Changes in the private investment industry leading to a need for standardization and automation: Companies like Carta are turning manual and expensive processes into software solutions, driving efficiency and innovation in the private investment industry
The private investment industry has seen significant changes in recent years due to increased investor interest and regulatory pressure. These factors have put strain on operational processes and led to a need for standardization and automation. Companies like Carta have responded by turning traditionally manual and expensive processes into software solutions, such as 409A valuations and portfolio company data collection. This has not only made these processes more efficient but has also forced the rest of the industry to adapt or risk falling behind. The trend towards outsourcing back-office functions, driven in part by regulatory requirements and fee efficiency, has been a long-standing one, but the recent focus on software solutions is a new and exciting development. Carta's approach to solving these challenges through software has the potential to drive significant efficiencies and innovation across the private investment industry.
Streamlining the Inefficient Process of Collecting and Organizing Information from Subscription Documents: Pass Through identified a common pain point in the private investment industry and created a software solution to streamline the process, providing a better experience for investors and potential fund managers.
The founders of Pass Through identified a common pain point in the private investment industry: the unstructured and inefficient process of collecting and organizing information from subscription documents. This problem was not only causing confusion and errors for investors, but also for law firms, fund managers, and compliance teams. Ben, one of the Pass Through co-founders, saw an opportunity to build a software solution that streamlined this process, making it more efficient and error-free. He wanted to create a workflow where investors only see the questions that apply to them, similar to TurboTax, eliminating the issue of incomplete subscription agreements. Pass Through was initially seen as a feature rather than a venture-backable business by some, but its hyperefficient distribution and potential to provide a better experience for investors, who could then become fund managers or investors in other funds, made it an attractive proposition. The founders' experience at Carta, where they helped launch the investor services group and faced the challenges of onboarding new funds, served as the spark for this innovative solution.
Leveraging Identity in Private Markets: Focusing on identity can lead to significant time and cost savings, increased control, reduced risk, and improved efficiency in private markets. Okta's experience in identity management offers valuable insights for developing intelligent and automated systems.
Identity is a powerful force in network-based businesses, as seen in the success of Okta. By focusing on identity, businesses can streamline processes, increase control, reduce risk, and improve efficiency. In the context of private markets, capturing and managing investor identity can lead to significant time and cost savings, as well as opening up new opportunities for regulatory compliance and regulatory reporting. Furthermore, the trend towards private markets adopting more public market practices makes the development of identity solutions even more crucial. Okta's experience in identity management in various contexts has provided valuable insights for the private markets, leading to the development of more intelligent and automated systems. Additionally, the potential for pass-through solutions, such as Okta's developer-facing API, could further enhance the capabilities of identity management platforms in private markets.
Automating Private Markets: Streamlining Inefficient Processes: Automating manual workflows in private markets, such as investor onboarding and data management, can save time, reduce errors, and free up resources for more profitable tasks. APIs and programmable interfaces can enhance user experience and minimize risks.
The private markets industry is ripe for automation, particularly in areas like investor onboarding and data management. Manual processes, such as chasing down signatures or updating wire instructions, are time-consuming and inefficient for both service providers and investors. By automating these workflows, businesses can free up resources to focus on more profitable tasks. The use of APIs and programmable interfaces can help create a more pleasant user experience and reduce the risk of errors. Additionally, the need for investors to constantly update their personal information creates another area for automation and data management solutions. Overall, there are numerous undifferentiated heavy lifting problems in the private markets industry that can be tackled through technology, from fund managers distributing capital to companies like Icapital facilitating investments. Automating these processes can save time, reduce errors, and ultimately help businesses grow.
Streamlining LP investment document completion: Companies like Carta automate LP investment processes, allowing quick first-time investments in 6 minutes and repeat investments in 3 minutes, enhancing the overall experience and providing GPs with greater visibility into the sales process.
Streamlining and automating the process of investment document completion for Limited Partners (LPs) can significantly reduce the time and effort required, enhancing the overall experience. Companies like Carta are transforming this process, allowing LPs to answer relevant questions only once and passively capturing information for future investments. The first-time investment process can be as quick as six minutes, and repeat investments can be even faster, taking only about three minutes. This not only saves time but also provides GPs with greater visibility into the sales process. The ultimate goal is to create a centralized system where LPs can manage their investments across multiple funds in one place, without the need to replace existing teams or tools. This approach aims to minimize the balkanization of LP identities across various platforms, allowing them to easily access and control their information.
Expanding sales reach through strong distribution networks: Building strong relationships with service providers and creating a user-friendly product experience are key to expanding sales reach in complex industries like private markets.
Building a strong distribution network is crucial for sales success, especially in complex industries like private markets. This can be achieved through simple, tactical actions like asking for referrals and creating a positive experience for service providers. By treating these relationships as valuable customer interactions, sales teams can expand their reach and increase their chances of closing deals. Additionally, creating a user-friendly product experience is essential for attracting and retaining investors. This can be accomplished through design choices that streamline the onboarding process and make the complex agreement filling process more accessible. Overall, the combination of strong networking and a user-friendly product can lead to significant sales growth in the private markets.
Effective collaboration for unsexy problems: Respect time, streamline process, recruit top talent by avoiding redundancy, setting clear expectations, and evaluating based on previous work, alignment, and practical assessments.
Effective collaboration is crucial in solving complex problems, even those considered unsexy or annoying, such as managing sub documents in an investment context. This involves respecting the time of all parties involved and ensuring a streamlined process that minimizes redundancy and miscommunication. By creating a seamless experience, a team can quickly and efficiently build around a problem and recruit top talent. A well-run process includes avoiding overlapping questions, setting clear expectations, and evaluating candidates based on their previous work, alignment with company values, and practical assessments. Ultimately, the key to recruiting a talented team around an unsexy problem lies in running a respectful, efficient, and transparent process that values everyone's time and expertise.
Thorough interview process for job candidates: Transparent communication, collecting relevant info, practical evaluations, and involving stakeholders ensure a successful hire
A thorough and thoughtful interview process is essential for evaluating job candidates and ensuring a good fit for both parties. The process should be transparent, with clear communication about the steps involved and the candidate's role in it. It's also important to collect relevant information, such as work history and understanding of the industry, to assess a candidate's suitability and alignment with the company's values. Practical evaluations, like case studies and portfolio reviews, can provide tangible evidence of a candidate's abilities. Additionally, involving investors or other stakeholders in the interview process can offer different perspectives and insights. Ultimately, a comprehensive interview process helps to minimize confusion, ensure fairness, and increase the likelihood of a successful hire. The speaker's personal background in operations and strategy influenced their approach to sales, which emphasizes the importance of repeatable processes and clear goals.
The Importance of Processes in Business: Processes are crucial for various business functions, including recruiting, sales, and operations. Effective planning, experimentation, and continuous improvement lead to better business outcomes.
Having a process-driven approach can significantly improve business outcomes. According to Pass Thru, processes are essential in various aspects of their business, including recruiting, sales, and operations. The company values mistakes as opportunities to learn and improve processes. The process design for a new business endeavor involves careful planning and experimentation to arrive at an optimal process. Effective writers serve as a good analogy for process design - they plan out their ideas before writing, and businesses should do the same. Pass Thru believes that there is an optimal process for most things, but it's essential to be open to experimentation and tweaking. In the context of software pricing, Pass Thru emphasizes the importance of recurring revenue and ensuring that the pricing model aligns with the customer's usage patterns. Overall, a process-driven approach allows for quicker training, better feedback collection, and more thoughtful management of the business.
Tailoring Pricing for Unique Needs: Understand customer needs, experiment with pricing models, focus on perceived value, and continuously adapt to strategic growth and team development.
Pricing for a software solution, specifically for fund closing, should not be a one-size-fits-all approach. Instead, it's crucial to understand the unique needs and circumstances of each customer. The speaker mentioned experimenting with various pricing models, such as based on the number of investors or closes, but eventually landed on pricing based on the perceived value and willingness to pay. Another important lesson shared was the transition from being an individual contributor to a manager and leader, focusing on the strategic growth of the business and mentoring the team. Bundling services and constantly experimenting with pricing were also highlighted as effective strategies.
Adoption: A source of love and support: Adoption, a selfless act, shaped Tim's upbringing and character, providing him with valuable experiences and insights in his career.
Adoption, while a fact of life for Tim, has been a source of love and support that significantly shaped his upbringing and character. The openness and acceptance of his parents created a normalcy around his adoption, allowing him to grow up feeling loved and valued. Despite the challenges his parents faced in trying to expand their family, the adoption was ultimately a kind and selfless act that allowed Tim to thrive. Additionally, Tim's experiences in the investor technology space and career transitions have provided him with valuable insights and lessons. His unique perspective on business, rooted in his personal experiences, has made the exploration of new ventures all the more rewarding.
