Private equity and venture capital funds are an important part of a comprehensive investment strategy for many professional market participants. Investments in private markets allow you to diversify your portfolio and gain access to additional returns by participating in non-public transactions at earlier stages.
The internal kitchen of such funds is usually a rather complex machine, managed by a very small team. In order for a fund to function successfully, this team must have a wide range of competencies:
- Marketing and fundraising (raising funds from investors)
- Investor Relations (investor relations and information provision)
- Generation of new deal flow (Pipeline formation)
- Management of the existing project portfolio (participation in business development, control, and reporting)
- Finance and Law (back office)
In many small funds this work falls on the shoulders of a team of 3-5 people. Therefore, it is very important that these people are able to interact effectively in a situation where time is lacking, and basic things like regular reporting or KPI portfolio control are maximally automated. To do this, as data volumes grow, some kind of unified IT system becomes necessary.
In software development there is a well-known concept of DevOps (Development Operations) – in fact, these people make sure that the product created by the development team, is delivered to the production stage quickly and reliably. Similarly, they often talk about RevOps (Revenue Operations) – a set of systems designed to make your sales funnel work efficiently. By analogy, PE/VC funds need “PE-Ops” or “VC-Ops”, a set of technologies that will simplify their daily work and provide the infrastructure for their key business processes.
How did iTech Capital manage to improve the daily operation of venture funds?
– At iTech Capital, we have long tried to build such a general fund infrastructure by putting it together in pieces. We met some of our needs with a CRM system, some with a management accounting system, and some with a BI-platform. However, the main difficulty lies in collecting all these data sources together. Unfortunately, there was no solution on the market that could suit our needs, taking into account our integration requirements on the one hand, and our budget on the other.
Another important factor is transparency for investors. iTech Capital has always stood out from the competition in this sense: in addition to such traditional things as audited reporting and regular NAV reports, we provide our LPs with access to the pipeline of future transactions and invite them to participate in investment committees. There are already over 80 investors in iTech Capital today, and their number is constantly growing. We are well acquainted with the concepts of daily communication with LPs, as well as the need for quality and professional answers to questions about the state of the portfolio, reporting, and new transactions. We needed a platform that would help us in this.
So we gradually came to the decision to develop our own SaaS product for funds. AIRR is a single platform for managing investment funds. It is a web portal for GPs (General Partners, Managers) and LPs (Limited Partners, Investors) and a mobile application for LPs to track their investments.
Tell us about the team and how long did it take to build the product?
– It took us a year to build the platform, we engaged a team of external developers for certain tasks, but the basis of the product is fund’s insider experience in the industry. We manage on our own, because we have a deep understanding of the process and know the pain points at all levels of the investment process.
The task of building such a platform from scratch is very ambitious and time-consuming, as there are quite a lot of business processes in the fund. That is why we decided to focus on building integrations with other products (CRM, BI, accounting), connecting them as external solutions and made AIRR the most open platform on the market. A new fund that wants to use AIRR does not need to give up its IT systems and rebuild everything from scratch, they can just connect their existing tools to AIRR and use it as a single portal for integration.
We tried to strike the right balance between simplicity and functionality. In the market of investment management solutions there are 2 types of products – either extremely simple tools that only let you look at quotations and the structure of the portfolio or – another extreme – expensive and difficult “fund ERP” solutions which together with all additional necessary programs will cost from $70-100k a year. Thus funds like ours and small family offices usually need something in the middle ($500-700 a month). therefore within the framework of AIRR we, having stuffed all bumps on the way ourselves, have left only what is really necessary to a small PE/VC fund.
What exactly can you do with AIRR?
- Calculate the value of the portfolio (NAV) in realtime, with daily updated exchange data on Comparable Companies.
- Synchronize accounting/banking data with the metrics that the investor sees (DPI, RVPI, IRR, etc.) and calculate these metrics online.
- Combine fund metrics with operational metrics on portfolio companies (MAU/DAU, ARPU, CAC, LTV) and track all this, again daily
- Build work with the pipeline projects, track pitch deck materials in a single portal and assign responsible analysts, as well as to synchronize this work with an external CRM-system, if needed.
- Make all documents and materials on the fund available to investors via mobile application
- Put the KYC/AML documentation in order, making you have full coverage of the fund participants
- And much more.
The platform is available as a SaaS solution as well as an On-Premise solution in case of such need. The mobile application for investors is available free of charge.
It is possible to have a free trial period to be introduced to AIRR solution, you can sign up for a demo below.