#2 My First Fund: Choosing VC Fund Administration and Infrastructure Software.
#2 My First Fund: Choosing VC Fund Administration and Infrastructure Software.
Finding the right balance between cost effectiveness, professional fund admin., and allocation of (limited) emerging fund managers' time to administrative tasks.
One year ago when we decided to raise our first fund to invest in AfricaTech, we started looking for fund administrators in Mauritius. We’re investing exclusively in Africa, so Mauritius appeared to be the #1 jurisdiction for fund administration on the continent and it is also foreigners friendly.
For this pilot fund, no anchor investors dictating the jurisdiction or anything else. We were free to choose to optimize for a hustle free fund administrator.
As we were progressing in our research, I started to get frighten by the amount of paperwork, the lack of automation, and Mauritius’ pace wasn’t to my taste…
“What if we create our own admin software for Mauritius funds? We hire a developer to built our dashboard to manage our investors onboarding, reporting and track our investments. That way, we remove frictions with the fund administrator.”- Jérémy Goillot
Jérémy’s proposition was enticing and aligned with our product approach to manage our fund! However, when the fund administrator mentioned that we needed to mail to Mauritius certain legal documents because the digital signature wasn’t fully recognized by law, that was too much. Years of legal practice made me paper phobic!
Our focus should be on sourcing the best deals, supporting founders and building our brand for this pilot fund. Remember, it is our favorite side hustle, let’s not turn this into an administrative nightmare.
The quest for fund admin platforms started, yallah 😅. I am sharing in this article:
the basics about VC back-office,
how to choose your fund admin & infra by ranking your priorities and comparing providers,
some final thoughts!
In this article I assume that a micro fund (or pilot fund) is less than $5M AUM.
VC Fund Back-Office Basics.
You’ve probably heard that if you raise $1M or $10M the fund admin costs are the same. That’s because VC funds lifecycle are the same regardless of the size of the fund. Okay, it gets more complex for larger funds, but you need a back-office or multiple services providers to support the same admin tasks across funds:
Fund Formation.
Bank account opening.
Capital Raising.
Fund payments (capital calls and returns).
Investments. Follow-on Investments.
Monitoring investments.
Compliance and KYC.
Accounting and tax declarations.
Reporting (investors and regulatory).
Spin-off global investment structures (SPVs).
You can decide to outsource these tasks to a traditional fund administrator or platforms offering fund administration at scale. Fund admin platforms essentially offer a tech layer to otherwise manual tasks (fund formation, bank account opening, capital raising, fund payments, investments, monitoring investments, compliance, accounting, tax declarations). Certain providers are more product led like Roundtable, AngelList or Sydecar.
Choosing your Fund Admin & Infra.
Rank your priorities.
There is nothing worst than customers that don’t know what they are looking for, so start by ranking your priorities before getting on a call with the sales person! For that you need to have a vision for what you want to become. You can also list your priorities, assign a weight (1-5) to each, and rate providers. We picked the platform that had the highest score.
Limit admin tasks for fund managers
Digital closing (for LPs and target companies)
API with banking provider
Launch the fund within 1 month
Flat fee for organizational and administrative expenses
Enhanced LPs onboarding process
Product-driven approach
Fund and SPV product
Well-funded and reputable firm
Structure that can scale with us
Soft considerations (personal preference)
Fund Admin & Infra Software Warnings.
First, there are many providers on the market but very few cater to micro funds. Make sure that the provider has a pricing structure that makes sense for (1) your deal volume & velocity, (2) number of LPs, and (3) target AUM.
Sydecar is the only reputable provider on the market with a REAL micro fund pricing - sadly, their fund product was not live when we launched. It is ideal for first time fund managers as they have a pricing suited for each stage of your fund manager journey (micro fund, emerging fund, VC fund etc.). They bring their product-led approach to fund administration and infrastructure to empower the fund manager to focus on raising funds and closing deals.
AngelList also has an offer for less than $5M funds at about $22,000 per year (including K-1 filings). This is pricey unless (1) you want to access AngelList’s community, (2) you have a high deal volume, and (3) a large LPs base. By the way, AngelList is absolutely not positioning itself as the cheapest option on the market, quite the contrary actually.
Once you raise more fund and have an operating partner onboard, Carta is probably a more robust option.
Second, make sure to understand the services offered by each provider you are screening.
There are three main categories of services:
Legal & regulatory infrastructure: to create the fund or SPVs using the platform legal template. Some platform also get the EIN for you and open the bank account.
Software to manage the fund digitally: LPs onboarding, data room, reporting (not automated but available for review and distribution via the platform).
Compliance & tax filing: to ensure compliance with state and federal regulations to manage a VC fund and annual tax filings for the fund and your LPs.
For a micro fund you want a “Fund in a Box” solution with all of the above services included.
Third, make sure that you subscribe for no more than 1 year (renewable).
You can decide then if you want to change provider. I don’t see any benefit to signing a longer contract as most providers don’t lock the price anyways, so even if you sign a 3 years contract they could decide to increase the fees. If you can lock the price for a longer term contract, then it’s definitely worth it.
To take my decision I compared about 10 providers for Fund & SPV infrastructure and administration.
SPV Admin & Infra Comparison.
Click here to view it on your browser.
Fund Admin & Infra Comparison.
Click here to view it on your browser.
As a reference point a traditional fund administrator in the U.S. costs about $16k-$30k per year for a fund of less than $10M.
Final Thoughts.
Remember, as a first step, ask yourself whether you want to build a syndicate or raise a fund (read here about the differences). Key decision-making factors are your AUM, your fund strategy, and what you want to become!
Then you can compare tools, some additional resources below:
Pricing Tools. Vauban has a cool tool to compare SPV vs Fund. AngelList has a pricing tool to compare its products. Consilience advocates for decentralized ownership model and has a tool comparing its digital fund product to traditional VC funds.
VC stack. This website lists most providers and this article provides a high level comparison of other fund admin & infra providers.
Ultimately, you want to balance the fact that you are just starting and that you are building a fund that will last for 10 years. You cannot optimize everything, however, you can move fast, learn and iterate ✌️.
Hope this article will help other first time fund managers to navigate the fund administration and infrastructure softwares.
Drop a comment or reach out to rena@kara.ventures if you want to submit any changes or amelioration to this article.
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#2 My First Fund: Choosing VC Fund Administration and Infrastructure Software.
Great article!