As head of go-to-market strategy for investor services at Carta, Tim Flannery recognized the inefficiencies of using paper documents to onboard LPs to a fund. To solve this problem, he created Passthrough, a fund workflow automation tool that streamlines the LP onboarding process.
In this insightful conversation, Tim, CEO of Passthrough, sheds light on the history of private equity, today's evolving fintech landscape, as well as how to onboard investors and grow a fund.
The Evolution of Private Equity:
How did alternative investments became a $15 trillion industry? In 1985, David Swenson, Yale's newly appointed endowment chief investment officer, shifted the traditional investment strategy by allocating a substantial portion of their funds to alternative investments, including private equity. This unconventional approach resulted in a 20x increase in their assets over the next two decades. The Yale model was copied by other endowments, family offices, pension plans, and long-term investors. As a result, the alternative investment space (venture capital, infrastructure, real estate, and more) has expanded from under $50 billion in 1999 to a $15 trillion industry by the end of 2021.
How Passthrough raised a successful round in 2022:
VCs deploy less capital today than in 2021, so raising a round can be difficult for founders. Tim shared the changes Passthrough made to position themselves for success. Compared to their 2021 Seed round, he said their 2022 Series A round required:
- More professionalism
- Tighter business metrics
- A better idea of gross margin and customer acquisition costs than most companies
- Reset expectations around company valuation
- More thought about what they really want to optimize for
Fintech of the Future:
In discussing the intersection of technology and finance, Tim emphasized the importance of standards and interoperability in enabling seamless operations across different platforms. With Passthrough's focus on investor onboarding and KYC/AML compliance, Tim envisions a future where financial services are accessible to all, regardless of their background or expertise.
Advice for fund managers who want to onboard more LP’s:
- Build a strong brand as a firm and as an individual. Be a thought leader. Use content marketing, in-person events, and other strategies a private company would use. “It doesn't matter if you're an emerging manager or if you’re Blackstone, the thing that's enduring right now is having a brand that people can trust.”
- Take a long term approach. Make brand building and trust building a strategy that stretches over many years. It’s never too late to start now.
- Have a strong CRM. Surprisingly, this can be a differentiator.
- The most basic requirement that an LP wants to see in a fund? Good returns.
To learn more about Passthrough and stay updated on Tim's journey, visit Passthrough's website.
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