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Tim Flannery

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54

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2022-02-17

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2022-02-17

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1. “Know what probably affects me on an ongoing basis is my genetic predisposition for ADD. And so the fact that I cannot sit still rarely satisfied with intermediate outcome and just have this constant, constant motion. And so there's your little bit of nature versus nurture.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

2. “My parents had trouble having a second child. I was the second one that they tried to adopt. And then the first one actually got taken back. So my brother's 10 years older than me. And they had like a seven-year struggle trying to have a second child and going through the adoption agencies. And then a year or two before me, they did adopt someone and then they weren't able to keep them. And then turned out we were a good match.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Yeah. So my parents never hid for me that I was adopted from the moment I could talk, I would walk up to people and say, hi, my name's Tim and I'm adopted. I'm sure that was a little awkward. But it was just something that was fact. It wasn't the stigma. It wasn't this anything else. It was just, all right, I've got blonde hair and blue eyes. And I'm adopted. It was just a fact about me. There was nothing that was too crazy about it. And so because of that, it was just this really, really normal thing. There was nothing traumatic about it. There was nothing whatever. It was just a fact of life. And I was never ever made to feel anything other than a loved member of my family.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

4. “Even though I look very, very similar to my mother, my father, my brother, I'm adopted. And so the kindest thing that ever happened was that my birth mother made the difficult choice to give me up for adoption. And so I got to go grow up with a family in suburban Pennsylvania, just be surrounded by people who were loving and able. And that support, just that attitude and the amount of love that I was able to get on a daily basis set me up to just thrive and kind of set who I am as a person today.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

5. “From well, I need to make sure this fund gets out by tomorrow to how do I think about what we're doing over the next three to five years has been really rewarding.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Ben periodically loves going out and helping to onboard a fund. It's not the best use of his time at all, but you start to shift your context from not what's the thing that I need to solve this moment and what's the thing that is due today to, all right, well, what does a successful week look like? What's a successful month look like? What should we be doing over the next quarter, over the next year? It's not purely a budgeting exercise. It's how you step back and think about the strategy of the business. Maybe the most rewarding thing for me has been figuring out, one, how I can mentor and coach my team so that they can handle all this day-to-day and they can have this growth in their careers and they can do all these other things. We always make sure that pass-through is good for them and they're good for pass-through and the math always needs to work out. And so a lot of it's on career management. Career management is just fun stuff. But then the second part is my point of view on the business is totally different than at any point in my career, whether or not I was leading go to market for Cartis Investor Services or I was an investor. I just have a different horizon than I'm used to. And so that transition.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

7. “This is my first time being a founder. I sat down with another founder. He'd had a successful exit. He was working at an investment bank. He was now running this giant business there. And we started off with the three of us. And we were doing everything. We were doing customer operations. We were doing support for investors. We were onboarding funds. We were building a product. We were doing all of it, just the three of us. When you're getting going, you're the super individual contributor. You're going out and your hands are in absolutely everything. And you're really good at it. That's kind of why the business takes off is because you're really, really good at it. Feels really good. It's emotionally rewarding. But he said, well, you're going out, you're about to hire your first couple of employees. My favorite transition was when I went from being the super contributor to there's actually what I need to do is get my team up to speed because it's not a good use of my time if I'm going out and doing this thing. And even though it's really rewarding.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

8. “It's a rolling close, or what if it's everything else? And so eventually the way that we got to pricing, or at least our current iteration of it, and we continue to experiment and will continue to, is we just think about it, all right, there's a maximum price that fund closing is worth, and that price is not based on the cost of it. It's not cost plus pricing. It's not competitor pricing. It's what we think the value is. It's willingness to pay. And so we think the maximum willingness to pay for this is X. And so that's what it looks like if you are a large global asset manager. And if you're smaller, and that might be a number of LPs, it might be a number of... We discount it. That's it. And so we try to match it to where you can afford it, but we understand what the value is that we're bringing. And that's how we price it today.”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Favorite things, which is bundling, so you're constantly in the market, you have expectations of what you're doing from year A to year B. You have all of these other different things that could happen. And so you're a very active fund manager. Let's bundle some stuff together. I get the advantage of collecting more revenue up front. You get the advantage of I can have some efficiencies. And that lets me get a little bit more flexible in price than I would otherwise. You actually did an episode on bundling a year or two ago. It's a great episode, but bundling is incredibly powerful. It changed the way that we sold at Carta. It changes the way that we talk to our customers today. And it matches up across a ton of different context. And we're constantly experimenting with pricing too. So when we first started, we said, well, let's just do it based on the number of investors. It's the discrete activity that happens. You have a certain number of investors that run through your fund, but it might not be predictable, and you might not know what's going on. Another one was, well, we could just do it based on the number of closes. Well, what if...”

   2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

10. “When you're a software business, what you try to do is you look for recurring revenue. But if you're business model and your pricing model doesn't match what the customer is doing in practice and you've got something that's broken, one of the earliest decisions that we had to make was, all right, well, I'm a fund manager. I might go out and raise every five years, every three years. Might raise 20 times a year. And so what does it actually look like for us to price some fun closing software? If we tried to force a subscription model down somebody's throat that was raising every three years, that's not going to be very effective. We need to actually match what it is that they're doing. Now, there's some argument to be made, well, maybe you should go out and build something that's recurring in nature. Maybe, but I think the thing we've got to solve is fun closing first. So our pricing isn't necessarily a subscription. We may take a look at a subscription when we do one of my...”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Signed contract out of one meeting. And so you start with an assumption and you just systematically work through until eventually you arrive at something that looks like an optimal process. We truly believe that there is often an optimal process, an optimal way to go do things. And so what we'll say to people is, hey, here's the way that we think the world works. This isn't to say we're going to go turn you into a robot. We have no interest in turning people into robots. But we think that this is the best starting point. And then take this and make it your own. Tweak things, be thoughtful about it. And so it lets us train people so much quicker. It lets us collect the feedback that we need. It lets us just be more thoughtful about how we're managing the business, how we're managing the process, how we're tracking whether or not we're successful because every time we're going into something, we say, what's the measure for success here? And have we hit it?”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Kind of like writing an essay. There's lots of people who they're going to go write an essay, they're just going to go write. And they're going to go say, well, I've got all these ideas and I want to go put them all together. But the most effective writers that I know, my favorite writers, what they do is a lot of planning. And so they say, well, here are the certain things that I want to make sure that I'm capturing. I want to make sure that I'm saying like, here's my main idea one, how it goes to my main idea number two, how it gets to main idea number three, and then I'm going to wrap it all up in a conclusion. Most things kind of look like this when you're dealing with customers. Here's what I'm going to tell you. I'm going to tell you, and here's what I told you. And so it's the same idea across pretty much all these processes. Just be thoughtful about what it is that your goals are. And then what you can do when you are running a process is you can really quickly experiment. Well, I thought my goal was going to be this. I thought that we were only having in a sales context a discovery call. But actually, it's probably a discovery call and a demo. Well, you know what? Maybe it's a discovery call, a demo, and I'm going to give you a price. Actually, maybe I can actually get.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Might look like, well, this is a qualified lead, or they asked for a demo, or were negotiating a contract. And so if you start to break things down into their component parts, you can really quickly understand what's working, what isn't working, and you can experiment and get better and better and better. Whether I'm going out and selling or whether I'm going out and helping to go build an operations process or whatever, it all comes down to process. So there's all sorts of different outcomes that can happen and those outcomes can be totally random. But we think that if we actually tweak the processes and we start to understand where we can get more efficient, where we can learn more information, where we can provide a better experience, the outcomes are going to tilt in our favor a little bit more. We do it across everything at pass through, recruiting, sales, ops. It's all process driven. So we always look for an opportunity. We love when we make mistakes. We took a lot from Google's post-mortem culture. If you haven't read Google's post-mortem culture blog, I'd really recommend doing it. For every time we make a mistake, it's an opportunity to get.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

14. “Treasury operations is right there. And so I started off by doing this and just taking a look at broken processes and tweaking them and getting better. And then went from that into an accounting context and then to a trading context. And so everything was kind of operations, a little bit of work on strategy. Then I left and raised a micro VC fund with a couple of other people and that turned into a strategy and investing conversation. And I decided to go business school after that. And when I graduated from business school, I took a sales job. And so my background exclusively before this had been operations and strategy. I thought sales would be helpful if one day I was going to go run a business. Glad I made that choice. But my approach to sales then was there's got to be some repeatable process here. There's something that I can do time after time to evaluate if this candidate's a good fit, to just be able to judge if I had a good call. It shouldn't just be this gut feel. I should go into a call and I should know, what does success look like?”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

15. “I started my career at JP Morgan in an operations role. I actually started off just by wiring money between institutional investors and funds. So not the most glamorous of”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

16. “They got it, but they don't get it, and that's a proper screen as well. We also are really thoughtful about using our investors. So we bring in Sam Cates, who sits on our board, and Sam talks to a number of our candidates, and that helps them get a different context. There's the view of what we have as the operators of the business, but there's the view that Sam has sitting on our board. And so, hey, you are important. We do want you here. Here's how you should think about it. And so when we see somebody we like, we throw the kitchen sink at it. We're going to go win that business. And our hit rate for when we've actually made an offer, I think we had two candidates reject offers. Both of them asked for something that we thought was unfair given the role. And so it was a disagreement about comp. It had nothing to do with whether or not this was the right opportunity and they selected something else.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

17. “On, there's no confusion. You can move forward. Other elements of it is being thoughtful about the types of information that you're collecting. We believe pretty strongly that we want to make sure that when we're bringing people on, they do line up with our values. That's a big part of the evaluation process. We want to understand their work history, especially if it's relevant. We want to understand that they've actually done their homework into pass-through and into the private markets. So we'll hold you into a different standard if it's your first time ever looking at the private markets as opposed to you've been in the space for 20 years. Of course, we'll have different standards for people, but we want to see there's interest actually in what we're doing. Instead of somebody who's just coming in, we'll also try to do something that's practical. And so there's different things that you can do with practical. We have a written case study for one role. We've got a live case study for another one. We have a show me your portfolio for designer positions. There's a bunch of different ways that we can evaluate it, but try to understand in that context, how can you actually see something tangible from this person and use that to say,”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

18. “So, first part of it is that you need to make sure you're not asking overlapping questions. There's nothing that people hate more of like, tell me about a time when you experienced a failure and the next person says, tell me about a time when you experienced a failure. You're not learning anything new. Somebody's just repeating the same story. All you're just doing is wasting time. Part of it's setting expectations. We have on all of our job descriptions, here's exactly the process that we go through for every candidate. First of all, because it's equitable. So we need to run all the candidates through it so that we're getting a proper evaluation of everybody because everybody is the same set of things that we've taken a look at. But what that also does is it communicates it. I'm not in the dark as a candidate about what I'm going out and doing. I know, well, first I've got a screen, then I've got a case study, then I've got an onsite. And at the onset, it's going to be a mix of behavioral questions. It's going to be questions about my knowledge in the private markets. And then at the end of the day, I'm going to find out a week later, is this the right place for me? So they know exactly what's going on.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

19. “So, the first thing is that we ran a process that I'd be proud to run at a 100,000 person company, just as I'm proud to run it at a 20 person company”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

20. “I love unsexy businesses, and it's tough to get unsexier than subdocs. I don't have anybody dropping out of Stanford to try to solve this. So this is fantastic. There's a couple things. Part one is you got to run a good process. It doesn't matter if you're three people like when we started or 25 people, which were about to be shortly or hopefully much bigger than that. You have to run a process that respects the time of the individuals that you're talking to and also allows your team to learn about them. And so there's all sorts of ways that you can choose to evaluate people. You can obviously evaluate their previous work product. You can evaluate how they line up with your values. You can evaluate their interest in the company and you could do practical things to just make sure you're bringing in a quality talent. Great, but people can tell when you're running in a fish and or inefficient process. It doesn't matter if it's in recruiting or if it's in sales or if it's in operations. It's very obvious to people when there's something of substance behind it.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Makes it pretty quick, makes it pretty easy. And if you were going to go solve this over emails, then I've got one email here, one email here. This person wasn't CC'd. This person was left off. This person, whatever. And aggregate pain felt by all of these people, my favorite thing about pass-throughs. I've never had to convince people that subdocs are terrible. Everybody thinks that they are horrible. Cool, great. We make it pretty easy, and it looks like it's simple, it should look like it's simple. There's a lot of stuff that's complex behind it. It shouldn't feel like that. And so create that kind of experience, and that puts the network to work.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

22. “I am an individual. I'm a high net worth individual. I'm an ultra high net worth individual. I don't fill out my sub docs. All I do is sign the things at the end. So I might have my lawyer. I might have my CPA. I might have a variety of people that are filling out things on my behalf. It might be my trustee because it's an IRA. It might be all these different places. There's this really annoying problem of collaboration between every party. And so, yeah, it's between the fund manager and the investor and the law firm and the fund admin and the compliance team and your IR team. And the list goes on and on and it's totally configurable depending on the context. So that's an annoying problem. But even within these groups, there's all sorts of work that needs to happen. I'm an investor. I need to make sure that I've got my CPA filling out this one piece. I need to make sure that my accountant's filling out this other piece. And then I need to get alerted that, hey, it's time for me to actually go out and execute these documents too. It's like a vertical problem. It's not a horizontal problem. Being able to solve this at every level.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

23. “You're only seeing a subset of questions, so you're not getting blinded by the 200 questions that are out there, whether or not they apply to you. You're getting this guided tour through this complex agreement that if it's your first time investing in the privates, you're not going to fill it out correctly. There's effectively no chance that you can. And so cool, create a really good experience. And then that's just going to naturally turn into other things.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

24. “And so great, perfect. Again, very tactical. So, create a good experience for those other parties to treat them like customers. And you're going to go out and do pretty well on that. Then there's stuff that's a little bit product driven. We talked about this earlier. An investor in your fund could be a fund manager, could be an investor, could be in an IR team, could be in a million of different places. Create a simple, approachable, easy way to go out and execute a subdoc. Because at the end of the day, What's the subdoc? It's just this legal document you got to fill out so that everybody can go out and try to earn some money. And so let's just make it really easy. Then they move on and then they're done, and then that's kind of the whole thing. And so we've made a lot of design choices to make that simple for people. Investors, we want them to get moving really fast. So they come on board through their email. Again, like you would with DocuSign, you have a magic link that allows you to get moving really fast. You can bring in your collaborators.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Absolutely too. I mean, a couple things you learned from that. First of all, who to go talk to? Second of all, you took something that might have been a wasted call and you've turned it into a new lead. What's a better use of time than that? And there's all sorts of other opportunities to go out and ask for referrals. And so that's deeply embedded in our business. Somebody has a successful fundraise with us, which they all do. We say, hey, we know that you just had a successful raise. Is there anybody else you know that's raising right now that we should be able to?”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

26. “So, there's pieces that are tactical and strategic. Tactical pieces can start with I'm hopping on a call as a salesperson and I might even have an unqualified prospect that I'm talking to. But I know that the network is tight and maybe this isn't a problem that solves them. It's a very tactical thing you can do is before you get off the call and say, hey, my name's Tim. I'm one of the co-founders here. I'd be a terrible co-founder if I didn't ask you. I know that this isn't fit for you, but is there anybody else you know that we should be talking to? And so really simple tactical thing that's important because like people know like people. You know lots of fund managers. Fund managers know lots of fund managers. LPs know lots of LPs. And the context for that is universal. It's not just within the fund manager space, but it's especially powerful in the fund manager space.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

27. “It but our goal isn't that we're going to be able to go out and trade the performance of everything. We're not going to do your books and records. I'm not going to handle your audit. What I want to do is that when it's tax season, that information's in there and it's simple to go and grab instead of having to deal with everything else that's out there.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

28. “There's an element of that. There's lines that we don't want to cross. We don't want to become a service provider. We want to work with service providers. We don't need to go out and build an investor portal. We want to work with investor portals. And so our philosophy on this is you already have chosen your teams. You've chosen your tools. Why do you want to replace them? Maybe you do, but choosing pass-through shouldn't force you to choose to dump one of your teams. There's some element of, yes, here's the central place where I have all of my information. And what I want to be able to do is talk to people all the time where they have a profile on Angelist, a profile on Carta, on allocations, on like 50 other places where you can go out and invest right now. And so the experience that we want is that you don't have to worry about this balkanization of your identity across 50 different platforms. We want you to just be able to have it in one place. That way you can, yeah, you can see who you are and where this information goes and how to control.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

29. “Invest through it again. You just confirm that that's all the same. Click a button and then get to execution. The length of time that it's going to take a subscription document to be executed on a repeat investor, right now we've actually shrank it to about three minutes. That's pretty fast. But the limit on this is how quickly can we get the docu sign modal to pop up so that I can then click and sign? That's our limit.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

30. “So, good news the first time is actually better than you think it is too. So here's what the first time can be, and then let's start to talk about this second time is the first time the world record fastest subscription document that we've ever had somebody fill on our platform from scratch, correctly. Six minutes. And that's a process that normally takes hours of collaboration across me, my lawyer, my CPA, everybody else that I need to help fill out my documents. So if that's the experience that we can have for somebody the first time, the second time can be way better. If we can start at six minutes and then we've passively captured this information, what we can do today, like I mentioned, we can do it in a limited context. In some cases, we can pre-fill an entire subscription document. In some cases, we're pre-filling sections of a subscription document. We can take the information that you've already submitted. And when you log in, it works like DocuSign, you're just going through your email. You're then presented with all of your information about your investor profile, about your investor passport. And if you want to...”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Sign up quickly and easily. And so what we can do is even this one simple workflow of how do you help somebody sign up with a fund regardless of the context is immensely important across all these different people that are trying to make money in a million different ways. And so even this little thing of how do I make sure that my contacts are up to date, that's very applicable outside of the specific relationship that you have as a fund manager with your service providers. It's also applicable to I am a founder trying to build in this space and why would I want to waste my engineering time on something that should be a solved problem. And so it's the same thing that Plaid did with financial transaction verification. There's hooks that they've built in so that we don't need to do ACH test deposits. And that has transformational impacts on our business. And that transformational impact is felt all the way from firms like Carta, people that have just decided to build it on it from the ground up.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

32. “We know that there's a lot of wood chopped in the space from firsthand experience. And so it really is anything from, I'm a fund manager, one of my companies exited. I need to go distribute capital. The thing that you don't see as a fund manager is that your fund administrator is reaching out to all of your investors to reconfirm their wire instructions because those wire instructions are two years old. Same thing with if you have somebody who is transferring an LP interest or all these other things that are kind of like the constant changing state of the fund, there's a million of them that you're handling directly as a fund manager, whether it's through your finance or your IR team, that your law firm is handling or your fund admin is handling and everybody's doing it manually. The other part of it that's kind of interesting too is besides like the traditional providers that are doing it, take a look at a company like iCapital. iCapital, the way that they make money is by matching money with fund managers, the way that they don't make money is by making sure investors can”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

33. “Handle it correctly, then you've got information that's getting shared to the wrong people, or worst case, you've got a wire that's going out the wrong place. And so there's some data element to this as well where an investor can permission all these different people to have access to this data on a real-time as needed basis actually brings down the risk of running a provider, of running a fund, of everything else”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

34. “Do it with software. And so I think there's some component of this that we can have a programmable interface for the way people do this. And so our API allows people to go out and not have to worry about how do I go fix subdocs instead of how do I just have a really pleasant experience for my user, whether I'm a startup or whether I'm a service provider or whatever the context, have a really pleasant experience for them without having to solve on the face of it kind of looks like an easy challenge to solve subdocs but it's way harder than people think it is. So that's one. And the second part is we talked about this with the investor passport analogy. There's also some data element. There's not just investor onboarding, but I as an investor am constantly asked for information about who has access to my information. I have a new CPA, a new lawyer. I've got a new treasury team. I have a new set of banking instructions. First of all, it's a nightmare to be able to handle all that information. Second of all, if you don't handle it,”

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35. “Absolutely part of the plan. There's a couple different ways to look at it. One is what are people doing that are manual processes and it's done by individuals and teams and those teams could be repurposed to go out and do things that are more profitable for the business. Fund closing is one of them. There's tons of law firms and fund admins. Law firms are taking first, second, third year associates and they've graduated from law school and they're chasing down signatures. It's a terrible use of their time. They hate it. With fun closing, it's the first application of how we can take these workflows that exist throughout funds in the private markets and we can automate them. If I was building a modern day law firm or I was building a modern day fundamental or I was building a modern day tech platform that was in the space what I probably want to do is make sure that I could handle investor onboarding in some way that didn't look like I was doing it 15 years ago at JPMorgan. I'd want to be able to”

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36. “Trend of the private markets continuing to look more and more like the public markets. And so the reason that we got really excited about bringing on Octa and a number of their executives directly into the round was because we saw that they had been incredibly successful doing this in one environment and we wanted to see how they could help us reapply this learnings in another environment. They've been unbelievably helpful partners for us”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

37. “What we learned from Okta was that a lot of automation is tied to identity, and there's all sorts of different cuts to identity. If you can take a look at what Okta does, they say, well, who is this employee? What are the certain things that they're allowed to do? Also, they do some work around who are your customers, how can you start to identify that this customer is the same as that customer and make more intelligent decisions? And so it actually changes the way that not just you manage your security and infrastructure, but the way that you might manage your marketing and your outbound. And so whether it's the context of Okta that's doing that or different context, managing my logins as an individual in one password just by having a centralized, first of all, there's control. Second of all, there's speed. Third of all, there's reduced risk of error and exposure. And as we continue to live more and more of what we're doing online, then being able to actually own it and control it is a really important feature. And it's something that just allows businesses to move quicker. And we've seen this broader.”

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38. “Or weeks, and it was all tied to the unstructured data. And besides being really efficient, what we did is we captured this information. We allow an investor to own it and control it. And so that first, we can allow them to repurpose it across subscription documents, which we have available today in a limited way, but then allow them to repurpose it across other contexts. So think about like an investor passport. So you want to go have KYC performed on you. Why should it be performed 50 different times that's inefficient for the entire system? And so when we start to remove all those inefficiencies, it actually changes the way that the private markets flow and function. And so that felt big. That felt really big and it just felt like it was a worthwhile product to go build.”

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39. “We saw something similar with cap tables. We knew that lesson really well. The thing that really got me excited about, though, was great. We can acquire new business easily, but the fun thing is that just by having somebody fill out a subscription document, we get to capture their identity. Subscription documents ask for all sorts of information like, who are you? Where do you live? Who are all your contacts? Why are you accredited and available to invest in this fund? Why are you qualified? Are you subject to Freedom Information Act? All of these different things. And this information is repurposed across a million different contexts. So it's used for KYC AML. You screen an investor against a sanctions list to determine whether or not they might be laundering money through your fund. It's used for regulatory reporting purposes. It's used for banking purposes. When you want to open up a bank account as a fund manager or apply for a line of credit, everybody was doing was the same thing that we were doing with Carta, which is taking these executed subdocs and exchanging PDFs. And everybody was doing this exact same verification process that was taking days.”

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40. “Really, just the issue of executing these subdocs. We take any subscription document, we build out this workflow where investors only see the questions that matter to them and they see every question that matters to them. It looks a lot like turbo tax. And so that way there's no such thing as an incomplete subscription agreement. And the chances that somebody makes an error go down tremendously. And so he had this insight that, great, there was a workflow to go build it. I actually didn't join as one of the initial founders. I joined about a year later in the company's life. When Bannon had approached me about joining, I was like, well, this feels like a feature. I don't understand why this is actually a venture-backable business. And he had this insight that there were some things that were really attractive about it. First was it's hyper efficient distribution. Every time you onboard a subscription document, a fund manager is telling you, hey, go out and meet my investors, provide a really, really good experience for them. And if those investors have a really good experience, those investors might be fund managers.”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

41. “An effective sales process with that. And then not only do you need to run an effective sales process, you need to coordinate all the pieces of the race. So how do you make sure that your compliance team, your fund admin, your law firm, your team, your investor”

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42. “Question applies to every investor. Even professional investors are filling these things out incorrectly all the time. And the state of the art is penned paper. So when we were onboarding new funds, we would get these emerging managers with 100 investors. And Ben had to stand up a team that was taking information out of these subscription documents and giving them into an Excel file to go upload them into our investor portal. It was unstructured. And he was so confused. The rest of the world was getting structured data, but somehow subdocs were still trapped in the 90s. This unstructured data was a problem for our team at Path, or who else was it a problem for? It was a problem for the law firms because they need to pull out all sorts of information so they can tell you status of the rays, understand the different risks that your investors are bringing in. It's important for fund managers that need to get into their CRMs. The fund managers then also have the fund task of trying to understand where they are in the raise at any given time. And so once you send out a PDF, how do you actually know what your status is?”

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43. “My partner's Alex and Ben joined Carta after the series A and Series B. I joined after the Series C. And they helped launch initially the Investor Services group. And so it includes the ACA20 and portfolio, the data collection stuff. And they also helped launch fund administration. And so CARTAS fund administration was meant to be and is meant to be a software-driven approach to it. And like most things ACARDA was growing really quickly. And when things were growing really quickly, how do you onboard new funds? What you do is you take these executed subscription agreements. And again, for context, the subscription agreement, if you wanted to go invest in Apple today, you could go sign up on Schwab or on Robinhood in two minutes, and then you could be investing in Apple and everything else that's out there. If you wanted to go invest in the latest private fund, whatever, instead, they give you a 50-page, 100-page, 100 question, 200 question questionnaire where there's no standard.”

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44. “Strangely enough, my life took me back to fund administration at CARTA. I never thought it would. Even then, we saw that there was this trend of people outsourcing it because it was more fee efficient and it was also a little bit more risk efficient. And so part of its regulatory, but regulatory has driven the need. The way that it's been solved today has primarily been through service. And what I love seeing with CART is CART has started solving it with software. And so that's kind of our point of view too. We think that there's lots of room to go out and drive efficiencies across all these different things so that when SEMA and the Cayman comes out and says, well, here's this other new thing that you need to do that you didn't need to do last year, then you can just have something that handles it for you without having to do a total scramble, hire a new person and find a new provider. And it shouldn't be the case. It's all the same information that's moving back and forth anyways.”

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45. “Industry forward. And then there's all sorts of other work that Carta and eye level and everybody else is doing around portfolio company data collection. And then it was, well, all right, well, I want to be an emerging manager. And we talked about this a little bit earlier. How do I actually just go stand up this fund? What I know how to do is I know how to go find good companies. I know how to go do whatever the reason is that I want to go out and be a manager. And so Carta eventually started building tools that allowed people to do this through software. They did it with a fund administrator. They did it with a SPV in the box offering. They did it with a variety of different solutions. And now you're seeing them all over the place. It allows people to just go out and focus on their investment returns rather than on their back office. And so we saw this broader trend across the privates, really, I think, dating back to there's something about Sarbanes Oxley to this. There's also something about financial crisis and people getting lean with their fees. I started my career at JPMorgan in the fund administration group.”

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46. “Into what you're doing as a fund manager. And so Carta allowed people to actually go out and manage everything. And then we saw Carta start to build all these other tools in the investor services side. So the parallel and the company side was a 49A. 49A was this thing that used to have to go out and pay an analyst to prepare for you. And it was this expensive, still annoying process that nobody really got major value out of. It was just a requirement. And so Carter managed to take that and turn it into software. And then Carda found other things that they could start to turn into software too. So they took this from a 49A for a company to an ASCA20. So fair market valuations for financial reporting for you as a fund manager. So when you start to do things like that, they put pressure on the rest of the industry. First of all, I think you saw a collapse of a lot of competitors in the space that were unable to adapt at the times. But you also saw that people were forced to have a technology solution. It really brought the entire”

    2022-02-17 · Invest Like the Best · Tim Flannery - Simplifying Fund Closing - [Founder’s Field Guide, EP. 55] · IDENTIFIED FROM THE TRANSCRIPT · source

47. “That there was increased regulatory pressure. So it wasn't just that you were bringing people in, but private funds continue to be held to higher standard. They're not treated like banks today. They don't, the same KYC AML requirements as broker dealers, but everything that's happening, it doesn't even matter what you're domicile is, what your regulatory regime is. We're seeing more and more pressure on people. So Carta started first off by doing a little bit of standardization on the venture side, where we could take a look at all of our investments as a fund manager and understand what we owned and what the broader context of the performance over time. And we got to see the consolidation of that portfolio too. That starts to give fund managers a new view of what it is that they own, which allows them to just a better insight real time. Then we saw things on the company side, which is a little bit less relevant to the conversation. But anytime that there's an inefficiency with your companies, it also spills over.”

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48. “The best point of view I have from this is from my time at CARTA. So, what we'd seen was that the private market space was this niche industry where there were a number of players and there was a number of investors. And because there was just this smaller subset of people, there was all these inefficiencies from how to go out and execute a close and open up your bank account and handle all your compliance work and everything else. But then we saw a couple of things happening. We talked about a little bit earlier. One is that we're seeing more and more investors that are coming in. And so operations that were set up to be able to handle the 20 or 30 institutional LPs can't handle the giant RIAs with thousands of clients that want to go deploy into them. And so first we saw that there was more investors that started coming in. And so that started putting strain across all of the operational processes that people were doing across the firm. The second thing that we saw”

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49. “Totally correct. The reason that you're a fund manager, part of it is because you're good at convincing people to give you capital. But the main reason is because you're good at deploying the capital. And so let's reward you for the things that you're good at instead of having to have you focus on everything else that's not core to your business. And so there's kind of two things. One is it means that I might not have had the opportunity to go out and build this on my own because Amount of time, the amount of energy, I don't have the expertise for it. That could be something that holds me back. But the second thing that can happen is people that already are professional fund managers, it allows them to move with greater speed.”

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50. “What levels are you granting? It's giving control back to the investors. You use the word friction. It's removing friction from fund managers. It's hard enough to convince people to invest in your funds for lots of fund managers. So why don't you just make it simple enough that when somebody invests into your fund that you can just go collect the capital and get to work doing the thing that they're paying you for? Making good investments.”

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