Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
00:04:06 · Venkat Subramaniam, Michael Sidgmore
[00:04:06] S2: Before DealsPlus, I was a tax adviser, as you as you know. So my day job was helping private equity funds structure transactions. We used to do two things, deal structuring, or you're doing due diligence. And both go hand in hand. So you're putting in place all these really complex structures to make sure your returns are aligned, management equity plans, funds, and so on. And then on the other side, when a portfolio is coming for an exit, you're asking for all the information on those structures and your diligence in them. And what we were seeing was every time we would work on a transaction, especially on the diligence side, it used to take a long time to get hold of the facts. And then you'd find a lot of things haven't happened the way they should have happened and, you know, risks come in. And so you kind of go at some point, well, there must be a better way of doing these things. You're managing so much money. I think private equity funds manage about 7,000,000,000,000 or more in assets, and you're putting in place some very sophisticated investment structures, and there must be a better way of doing this. And that was the genesis behind DealsPlus. When you were in [00:05:10] S1: the middle of some of those transactions, what was it like? Like, walk us through some of the challenges that both you as the advisor, helping firms structure things, faced, but also, I'm sure you dealt with the team members too. As they were trying to deal with all of this, how did they feel?
00:05:10 · Michael Sidgmore, Venkat Subramaniam
[00:05:10] S1: the middle of some of those transactions, what was it like? Like, walk us through some of the challenges that both you as the advisor, helping firms structure things, faced, but also, I'm sure you dealt with the team members too. As they were trying to deal with all of this, how did they feel? [00:05:26] S2: We have plenty of war stories, and and I think if you speak to people in this industry, whether it's tax, legal, advisers, deal teams, they'll always say something that they have experienced. I've got lots of stories. One of the best I have is actually not mine personally, but our CPO's. He was also ex tax accountant. And there was this transaction at a big take public of a big private equity portfolio company. And it was, as always, time pressured. And he was doing the modeling of the returns. Basically, what was being projected in an Excel file was way off the reality because some of the instruments were not being accrued or the terms are different or the dates of accruals are different, and it's off by few billions of pounds, and and this kind of returns that have been communicated to various people. So that was a big nightmare. You you... None of this should be happening, but it does happen all the time. So you're under severe pressure, multiple teams, and you're trying to deliver in time. [00:06:25] S1: Why do you think there's such a lack of uniformity around many of these transactions and the processes? Is that something that has just been the way things have been industry? Is that a lack of technology? Is it something else?
00:06:25 · Michael Sidgmore, Venkat Subramaniam
[00:06:25] S1: Why do you think there's such a lack of uniformity around many of these transactions and the processes? Is that something that has just been the way things have been industry? Is that a lack of technology? Is it something else? [00:06:39] S2: I think it's a combination of both. With most industries, your front office is way ahead of what back office needs to do to catch up, and that's been partly what's happened with private equity as well. But I think things are now catching up, which is good news. I think there's a real realization that technology is there and it can do things. And when you have industry people trying to solve the problem with technology... And I think things like cloud computing and the way UI UX has improved and so on makes a huge difference. But Excel overload, back office always trying to catch up and keep up with front office, and that creates a lot of these problems. Do you think [00:07:16] S1: a lot of the technology solutions that are now being built for private markets could have been built five, ten years ago, or did technology innovation, whether it was process automation, AI, cloud, those things really been what's driven a lot of the more recent innovation in private markets? I think the the two biggest things that have made
00:07:16 · Michael Sidgmore, Venkat Subramaniam
[00:07:16] S1: a lot of the technology solutions that are now being built for private markets could have been built five, ten years ago, or did technology innovation, whether it was process automation, AI, cloud, those things really been what's driven a lot of the more recent innovation in private markets? I think the the two biggest things that have made [00:07:36] S2: the biggest difference for people like us to come and solve this is cloud computing. Cloud has really made a huge difference. You can launch products a lot more easily and a lot quickly. And I think there's a realization that processes are very important. And if you want humans to work with technology, the UI UX needs to be very, very clean and very user friendly. If you look at the legacy software systems, they were not really built for purpose. Some of the front technology and the way people are designing things, enterprise applications are becoming more like your Netflix of the world and so on. It's very, very important. And once that happens, data becomes cleaner that's coming in, and then AI can obviously play its role if the data is there. I think cloud computing and the way people think about designing software.
00:07:36 · Venkat Subramaniam, Michael Sidgmore
[00:07:36] S2: the biggest difference for people like us to come and solve this is cloud computing. Cloud has really made a huge difference. You can launch products a lot more easily and a lot quickly. And I think there's a realization that processes are very important. And if you want humans to work with technology, the UI UX needs to be very, very clean and very user friendly. If you look at the legacy software systems, they were not really built for purpose. Some of the front technology and the way people are designing things, enterprise applications are becoming more like your Netflix of the world and so on. It's very, very important. And once that happens, data becomes cleaner that's coming in, and then AI can obviously play its role if the data is there. I think cloud computing and the way people think about designing software. [00:08:24] S1: That's a really important point, the consumerization of enterprise software. Because people as consumers are so used to using certain technologies, and they expect, I think they demand more of Yeah. The way in which their user experience is. On that point, I actually had Griff Norville, who's the head of technology at Hamilton Lane. He said that private markets needs to move from the stone age or the Excel age to the the digital age. What do you make of that? Like, do you feel that, especially for back office functions like cap table management, deal structuring, do you think ex... The Excel will still be the core of what they do, or are there now better solutions?
00:09:03 · Venkat Subramaniam
[00:09:03] S2: I think Excel is a great tool. I worked with Excel for many, many years, and I still love Excel. And I I think Excel will always have a use case. Excel is great if you're modeling scenarios, especially scenario analysis. If you have a lot of data and you wanna play around with it and see what it means, Excel is a great tool. What it's not good with is if you're trying to track events, you're trying to manage workflows. And when Excel is being used for that, that is where it sort of falters, and that's where I think technology has got a huge role to play. Captable is a very good example because you've got two things happening there. You've got a ownership position at a point in time, and then you've got all the events that are happening to get to that ownership position. I think if you're trying to use Excel to manage the latter, it will be a big issue. But that's where all the problems you see come in. But if you need that data to flow into Excel to to then model your waterfalls and valuations, that is a great use case for Excel. So I think software will help Excel become more powerful and and vice versa.