00:07:56 · Charlie Tafoya
[00:07:56] S2: Certainly. Well, for a bit of quick history here, I mentioned that 2008 was sort of an inflection point. And that's true in many different forms, obviously, given the global financial crisis. But as it relates to private equity information, I would say that for the first time, LPs were really empowered to drive new levels of disclosure from GPs. Prior to this, really only the very largest funds would provide any level of true transparency at the underlying company level, meaning that the assets themselves and how they're fundamentally performing, their approaches to valuation, etcetera. More than normal simply to report your basically partnership financials and gap accounts and folks can know in effect what is the return that they're achieving. But they didn't have a very good sense of exposure and again, underlying drivers of performance. That really started to change in 2008. And I would say we were sort of in the second epoch, if you will, from that through 2020. And based on at least on our experience at Chronograph, March 2020 with COVID was really the next true inflection point in that you had a lot of folks with consumer exposures that were now suddenly having to revalue their portfolios, in many cases on a daily basis during the initial lockdowns. I mean, was just such a sense probably a free fall in that moment. And again, people really needed to understand what are the implications for our assets and exposures, And in short, those without the benefit of, in effect, structured information really found themselves without a paddle, which is to say, you know, they they really were caught in a hard place. So since 2020, I've not heard almost any investor try to argue that Excel is good enough. I think everybody broadly realizes the opportunity and benefits of having technology in place to assist with, as you noted, many of the evolving demands around data. But to the point, I would say that if you think of it as a soccer match, we're probably still in the first thirty minutes of play. We're probably at the thirty minute mark. So definitely still early, but happily, again, seeing a lot of normative shifts around, in particular, LP expectations with regard to GP data and technology competency. That's true even for first time managers. We're seeing this in DDQs.
00:10:05 · Charlie Tafoya, Solenne Niedercorn
For emerging managers, we're seeing this again really across all parts of the fundraising cycle. And now just given the broader fundraising context for GPs, which is to say it's been a difficult couple of years, I think GPs have woken up both the operational opportunity to have streamlined operations and ensure a true enterprise, if you will. But then further, it's it's really become, again, a precursor to actually going out and trying to fundraise. So happy to comment more on sort of the specifics, which is to say there's high degree of variabilities across different sub strategies, etcetera. But more thematically, we just say that, yeah, we're reaching a point now where again, people are benefiting from technology and realize the benefits of data. [00:10:48] S1: Yeah, so it's just the beginning, I believe. What role would you say advanced analytics play in improving the insight into portfolio performance? And is it something that is currently used by managers or not sufficiently in your opinion?
00:11:05 · Charlie Tafoya
[00:11:05] S2: Well, so Chronograph provides two different products, and this is in response to your question. One is for LPs, which is more analytics oriented. Because for a limited partner, the challenges are ones more of data aggregation, right? How do I take in all this information and structure in a way that gives it meaning? And then further, how do I then interpret that information in an efficient way? If I am a pension plan, for example, I may not have the human resources, the analysts and associates needed to actually process the volume of information I'm ultimately receiving. And so in short, there are probably questions I can answer with the data I hold, but I just don't have the operational capacity to address that. And so that's a good example of someone who will engage Chronograph to help them in effect get out those answers. For general partners, I would say the issue is less analytics. There's a lot of certainly very smart people that work in private equity, a lot of great people who can model. There's a lot of talented technology folks as well now who are involved in all aspects of the value creation process at private equity firms, inclusive of analytics, but also now increasingly AI applications. There, would say the challenge is one more of data availability. Do you have a process in place to actually collect data in an efficient way, again structure it and then report out to your LPs and make it otherwise for portfolio monitoring, again, a way that maximizes your own understanding of your portfolio and opportunities, again, for value creation. So I draw that distinction between LPs and GPs to say that there are different sides of the coin. GPs again need to be more focused on basically the process of gathering and creating the data that they then report out. LPs conversely are more focused on receiving that information and consuming it in an efficient way. So hopefully that answers your question. But yeah, trying to provide a bit of, again, broader context here.
00:12:54 · Solenne Niedercorn
[00:12:54] S1: Okay, interesting. Thank you very much. So now if we focus more particularly on Chronograph, I would be interested that you describe to us the way you launched the business. So now it's been years that you launched it, you already have great investors. And we'll talk a little bit about your investors. So what was the starting point? A blank page? A team? How did you start this business?
00:13:17 · Charlie Tafoya
[00:13:17] S2: Well, you already mentioned some of the original context, was to say sitting there and looking up one day and seeing a bunch of high cost investment professionals manually typing numbers into Excel, which I'm sure many of your listeners will identify with. And that just struck me as a fundamental disconnect. And so in short, started to do some diligence on, well, how have others solved this problem? What is available? And again, you can ultimately, I suppose, call it nerdy arrogance. But we felt that there, in short, no one was really addressing the problem in the right way. So around that time, I actually was introduced to my co founder Michael Bridge. Our wives actually worked together at Bain as consultants. And they've been encouraging us as tech nerds and private equity guys to get together. And we deferred and demurred a bit, but ultimately did get together in Brooklyn, which we're still headquartered today. We had a coffee, which over the course of the day turned into an evening whiskey. And we just saw a lot of the same fundamental problems from the perspective of both an LP and a GP. So both Bridge and I, as he's known, are developers by background. And in short, we were able to ultimately shake hands and sit down and start coding together. And that's basically what we did. So to tell you the story quickly, we originally sat in a windowless closet basically above a beer hall and specifically above the kitchen. And I know that because the smell of bratwurst would become quite pungent around 3PM when they started cooking. But we really built the initial LP platform even as it exists today in a handful of months just sitting there together and again really coding. And at that time, we felt confident we had built something that was sufficiently sophisticated to actually bring to market. So we decided to formally incorporate and put it online. And sadly, when we launched it officially, we had fewer visits to the website than there are even immediate members of my family. So not even my... All my brothers and sisters deemed it important enough to visit. And that was when we realized, okay, scaling a SaaS company takes a heck of a lot more, namely actually going out and selling it. And that was an important early lesson.
00:15:24 · Charlie Tafoya, Solenne Niedercorn
But from there, I would just say in short, we put our heads down and really started grinding for candidly a number of years to really build up the trust in the market and build up against sales motion and everything else that goes into selling software in this space. I'm gonna have to send them this episode because hopefully they'll love the shout out. But our first client was Pacific Life. And I think what's notable is that they were the first client of Investran back in the day, became the main accounting system actually in the private equity space for many years. So yeah, doing something right out there in Newport Beach. But we're very grateful to their early trust. In fact, they gave us some of our really great early feedback that still informs our product to this day. And they've been one of many great partners and clients that we've managed to build over time, noting that today we actually manage over $20,000,000,000,000 in gross assets on the platforms in very significant scale and candidly a bit of a who's who on the LP and GP side around clients and quality clients at that. [00:16:26] S1: I guess you went to bigger and bigger clients, correct? So what was your strategy in the beginning and how it happened in real life?