Fund_Management_Market_Review

Market Review VC Fund Management SaaS Solutions

Funds are spending more than ever on the best tools to work more efficiently and in sync AUM Asset A large on the rise Management Market Software Being formed Global Assets under Management will almost The global asset Global Investment double in size by 2025, management software Management Software from USD $84.9 trillion market to expand at a Market to reach USD in 2016 to USD $145.4 CAGR of 9.1% during the $5.76 billion by 2025. trillion by 2025. forecast period Investors are looking for the right tools, with expenses taking a secondary concern Sources: PWC, Goldstein Reseach, Kennethresearch

Technology Creeping Where do private equity firms in PE/VC stand in their journey? The traditionally stoic and relationship-driven Awareness raising Close to decision making Implementation industry of private markets investment is not being spared from the rise of technology Social Media 50% 18% 32% “ In short, Application programming interfaces 58% 18% 24% software is eating Big Data 70% 12% 18% the world. New Digital Platforms 71% 0% 29% Marc Andreessen Robotic process automation 73% 6% 21% Increasingly the fund managing industry is looking for software to make their activities more efficient Cognitive and machine Learning 88% 6%6% and profitable. Blockchain 91% 6%3% Robo-advisors 94% 3%3% Source: © KPMG/CREATE – Research survey 2018.

What is Fund Management Software? Investment management software is any software Fund management solutions range greatly in focus, use solution that aids investment professionals carry out case, and targeted users. For example, some solutions their day-to-day investment activities. target the management of unlisted assets for HNWI, while The tools are typically used to support middle-office others are squarely aimed at large portfolios of listed activities such as record keeping, portfolio tracking, securities for pension funds. This makes the market hard to audit and compliance tracking, LP management and delimit and compare solutions. In this report we will focus communication, and other tasks open to automation. on Fund Management solutions for Venture Capital Funds. Most common uses of fund management software KYC & Client Deal Investment Benchmarking & Account Compliance Data Management Sourcing Tracking Analytics Consolidation & reporting Import/Export Reports Back Office Front Office

Impact of Improved data management - Which data sets are most important? Investor Needs Risk Rating 8,1 Position and 8,0 Investors’ needs from fund management Liquidity Data 7,8 software is diverse, and depends heavily Security Master 7,8 on who is the intend user Performance Data 7,5 Universal however, is a desire for the 7,5 tools to be streamlined and easy to use; Regulatory Data 7,4 Not necessarily an easy task in such a technical and data-rich industry. Price and Valuation Customer ID 5

Which activities could benefit the most from digital innovation? Front Office Middle Office Back Office 57% 49% 69% 46% 40% 40% 37% 29% 29% 43% 40% 34% Portfolio risk Big data Research Due Risk and Client Asset CRM that Fund Trade and Valuation of Transfer Management analytics and diligence gathering works in a compliance onboarding via digital cheaper, accounting settlements liquid assets agent securities platforms faster and selection for end- better clients 6

Industry Dynamics Устоявшиеся Новые The market for fund management tools has Emails undergone major changes over the last few years Scheduling Move from on- Move from single- Email Address Data premises to use platforms to SaaS platforms “workflow” based CRM and Deal solutions Management Move from one- time fee to Increased Diligence Notes subscription model flexibility and modularity Software Metrics and Valuation Comps Integration of Increase in fully Portfolio Management machine learning integrated verticals. and Big Data From accounting to Private Company Data methods front-end CRM platforms 7

Legacy Players Legacy Players are being disrupted Modern Solution The market, despite having a few Upstarts are able to As an example, VC funds typically need well established “legacy” players, better focus on niche advanced cap table tools, more sophisticated is quickly being disrupted by more client needs and deliver private company portfolio valuation tools and focused and nimble entrants. a better tailored product a streamlined co-investment management solutions 8

Few solutions accurately meet all fund administrator’s needs Company Accounting Investment Data Charts & Analysis Leads and Document KYC Data Security Opportunities Management - AIRR - - - - --- - - - Altareturn (Allvue) - - - Altoo - - - CapRaise - - - Carta.com -- - - Citco - - - Diligent - - eFront - - 9 Elysys - FundWave - - IHS Markit - ILEVEL Investran PandaConnect QPLIX Fully integrated services often lack one or two features, and require an all-or-nothing approach Meanwhile purpose built tools only cover one function of investors’ needs

Market pricing has not settled Annual Subscription : $57,375 Additional modules : $50,000 Due to a shift in business model and new technological paradigm, no standard pricing scheme <$100m AUM : $5k has been established yet >$100m AUM : $10k Although most have centered on SaaS Fund software : $800-1,200/fund/month model, pricing can be linked to many metrics. Investor portal : $150/month (< 10 investors) Some of the most common used include: Price of the license : CHF 10,000/year • Number of Funds Average customers price : CHF 150,000/ year • Number of Users • Number of Portfolio Companies Free for angel investor 1 user • Assets under Management EUR 200/month/fund for 10 users EUR 990/month for all features and unlimited usage Total price paid also varies greatly • Some funds charge just a few hundred dollars a month • Others can charge several hundred thousand dollars per year Where applicable prices quoted for 2 Funds with total 150 AUM, 15 portfolio companies 10

Fund Management of the Future 2030 In the near future further technological NLP developments will continue to have an Automatic, Reliable Natural impact on the fund management language processing (NLP) ecosystem. Competitors will be pushed to data imports provide a higher level of service. In particular streamlining integration with 2025 existing services will be a top priority. Below are some examples of potential Machine Learning developments in the industry Smart” heuristic analysis and value added reports past simple charting 2020 Rise of the API “Plug and Play” integrations 11

Overall Industry attractiveness Diversified, but competitive Industry New Players Suppliers Buyers Alternatives Low entry costs have Complementary software GPs have a large Due to the limit of allowed a large quantity providers such as BI amount of leverage what a GPs job can be of upstarts in the space, systems, charge over competing fund outsourced, and the all competing for the standardized prices to a management solutions increasing necessity of same clients. Thankfully, wide range of clients, providers when technology, few viable the diversity in client giving them little leverage shopping around, but alternatives to needs allows for over fund management due to high switching purchasing fund differentiation through solution providers costs, client stickiness management software feature specialization remains high 12

Potential Future Market Forces Global AUM Pressure on Investor Price war Reduction Fees Preferences Undercut Slowdown Less money to Return of in-house spend bespoke paradigm Competitors may Market Downturn can begin to slash prices curb number of funds Downward pressure on Investors may begin to remain competitive, being launched fees may force funds to prefer to build undermining the to be reluctant to their own bespoke appeal of AIRR purchase additional solutions, instead of software a purchasing off-the- Competition shelf solutions Market 13

Conclusion 02 01 A few large legacy players dominate the biggest clients, but increasingly provide poor service The Fund management Software relative to their significantly higher cost industry is fragmented, competitive and rapidly changing 04 03 Due to the wide range of needs and products, comparisons are hard to draw. There does not Mid to small size clients are heavily fought yet seem to be any standardization in terms of over by a wide offering of products and features or pricing services 14 05 Prices are on a downward trend given increased competition and the rise of the SaaS business model

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