Anduin's VP of Strategic Partnerships Drake Paulson was recently interviewed by FinTec Buzz. See their original article here.
Financial technology has progressed at an unprecedented pace with the responsibility of handling data. Is the market transformation able to handle data?
Sure. I got my start with a large bank in finance and accounting, where I volunteered for a big system implementation project. That was a turning point where I learned that my passion and natural ability was really at the intersection of finance and technology. That’s the direction I pursued, and a few years later, I joined a VC firm to help revamp their technology and analytics approach.
Once I experienced the technology challenges of private capital, I was inspired to go out and build solutions.
Suddenly I was co-founding TopQ Software, which was at the forefront of the current digital transformation of how private market firms collect, analyze, and share data. TopQ was later acquired by a Nasdaq subsidiary called eVestment. I stayed on to help lead their push into private markets data and analytics. From there, I came to join Anduin.
A fortunate combination. I really missed the dynamics and excitement of a small startup. Also, it was a chance to tackle the emerging big challenge for the private markets—namely how to carry out the due diligence and onboard investors for a better experience through automation.
Once I got to know the Anduin executive team, we had clear chemistry and we aligned on the vision. I really feel that I’m in the right place, given my experience and what I am best at doing.
Easy answer: balancing the private part of private equity with the reporting transparency that LPs need, which they’ve come to expect in the public markets.
It’s also about enabling the managers to keep the actual recipe secret while giving the investor the detailed data they need. Right now managers spend too much time and resources distilling granular data into PDF reports only to have their investors spend similar time and resources to extract the end data. This can be fixed.
Lying ahead are potential expansion and elevation of this entire industry once information is handled consistently, flows efficiently, and is ready for investors to make analysis and comparisons easily. At the same time, security and privacy are paramount and must be handled rigorously.
Anduin has become, for many, their first and trusted source of truth for essential investor and fund commitment data. Our goal is to make that data seamlessly usable across our customers’ full technology stack. We’re continually expanding our partnerships, which already include leading law firms, fund administrators, and large technology providers.
By making Anduin an essential part of our clients’ technology ecosystem, we give them the best of two opposing polarities: the ease of use of an end-to-end platform with the functionality and depth of a best-of-breed approach. The result that we provide is a seamless and highly effective end-to-end solution for investor engagement.
Market competition is intensifying, number one.
As you’d expect, given that smaller independent investors are keenly interested in alternative investments. Some people call this democratization—I agree with that, and it’s also an exciting extension of our market. The new individual LPs have smaller portfolios, but there will be great numbers of them arriving within a short span of time. The competition for their business will be fierce.
These new participants change the game. All the funds have to contend with new regulations, technology gaps, and possible conflicts of interest. Some of these new investors will not know very much about alternative investments, or lock-up periods. Their registered advisors may have knowledge gaps. It will be an exciting time also with new types of investments in the alternative space.
We expect to see more publicly traded private funds, too.
In other words, more private managers going public and that will increase their requirements to have their data processing and IT infrastructure—and workflows—ready for public scrutiny.
On the fundraising side, there will be more funds forming and the speed of fundraising has to jump to keep pace with new investors.
Overall, the fundraising is getting more complex, too.
Another big shift is underway. Alternative investments are becoming less of a people business, with less networking, fewer meetups at conferences where you get to know people and build trust over months or years.
Overall, the pressure is mounting on managers to differentiate what they offer investors—for example, the investor experience they provide. Democratization also means voting, and fund managers know this new investor class will vote by bailing out if they don’t like the due diligence experience.
All these factors have really accelerated the digital transformation in private markets, and one result is that their technology environment becomes larger and more complex.
The demand for IR-focused technology is happening for a reason, and more than 100 vendors now have a footprint in the private market technology space. Some of them help to solve issues around data flows and the complexity of system integrations, which is key as the funds deploy more systems and handle more data.
Survival depends on being an essential part of the flow of information, and a robust ecosystem has sprung up for private markets.
The whole industry is looking at self-service options for LPs, for example replacing travel and the big annual meeting with video interviews of CEOs of the portfolio companies.
The technology should carry as much as possible of the interaction with investors through one channel. It’s unlikely to be all one vendor, but this industry is in the phase where best-of-breed solutions are integrated with each other.
Every fast-growing startup has to balance empowering employees to be dynamic and incredibly productive—against the procedures and processes to grow efficiently. In many companies, those are mutually exclusive, but with the right culture and leader they can thrive together.
I’ve been very impressed with how the Anduin team provides constant encouragement to each other, and brings a “we’re all in this together” attitude to each challenge.
We’ll continue to expand our best-in-class fund subscription product.
That means finding the white space around our current functionality where Anduin can very effectively solve problems that hinder growth and investor experience.
I can’t get into specifics of our product roadmap, but the problems are well known, like scaling due diligence and securing money flows between investors and funds, bringing consistency to data formats. We expect to integrate with leaders in specific roles like Know-Your-Customer and anti-ML requirements.
Finding creative ways to solve problems.
Anduin is part of a massive change that will sweep across a really important investment arena.
To be successful, we have to continue supplying private funds with what they need to overcome all the big challenges coming at the industry–so they can succeed in a very different business environment they will inhabit.