Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
00:28:44 · Michael Sidgmore, Venkat Subramaniam
[00:28:44] S1: Is there a certain feature within DealsPlus where CFO or finance team is using it and that's a wow feature? [00:28:53] S2: I think it's the waterfall that we're working on. That's the wow feature, because cap tables ultimately are a source for valuations. And there's two sets of valuations. There's the enterprise value that requires a lot of different things. You're getting KPI data, you're doing multiples and DCS and all that. That's not the evaluation I'm talking about. I'm talking about what happens to that equity value between all the different stakeholders, and that requires cap table data. And that's where the software ensures that your cap tables are accurate. But the WAF feature is the ability to take that cap table data, run it through the waterfall anytime, and see what it means for the fund, for the management teams, for co investors, and so on. So that's a big WAF feature. But then to get some of the instruments valued to debt instruments in in European structures are very commonly used, so your preference shares and loan notes insanely complex to get them right. You don't have to worry about any of those. So that's also a wow feature.
00:29:52 · Michael Sidgmore
[00:29:52] S1: Well, if we talk about two trends that are happening in private markets broadly, I'm sure that has an impact on valuations and waterfalls, which, one, the increasing prevalence of private debt and credit used to finance deals, and also the the changing market structure of private credit. Now you have a lot of direct lending, and a lot of single transactions where there's one private credit provider rather than a syndicate. Yep. That, I imagine, has a big impact. And then the other piece of it is valuing these investments on a more regular basis. I mean, as many of the larger firms are launching evergreen structures, valuations become, a, something that needs to happen more often, and b, as you work with the wealth channel, you can't get
00:30:34 · Venkat Subramaniam, Michael Sidgmore
[00:30:34] S2: it wrong. It happens every quarter even now, and it's a really messy process. Because if you're a fund and you have 50 investments, and some funds have a lot more, you know, 50 Excel spreadsheets, and they all look different. And things may have happened during that... Between last quarter and this quarter, and how do you know if this is right or wrong? And there's no validation in an Excel file, underlying documentation and and so many other things. And getting things wrong can come at a big cost. And audits can become very, very time consuming, but exits, it's a big cost. So you do need software and private... Like you said, lenders and then various stakeholders and PE deals are getting very complex now. Have co investors. Management teams are also now asking for a lot of data about their stakes and communication with management teams on a regular basis. You have to align your interests with them because they are working hard for the next five years and communicating what that means in a more meaningful manner requires all this data. This is where all the hard bit is. And if you don't get this right, then it can come back to bite too. [00:31:42] S1: You mentioned something in there, transparency, that's so important. I think for the investors in private markets, transparency is increasingly important, particularly as you get to the wealth channel that's learning about private markets. How do you think software solutions like DealsPlus help create more transparency
00:31:42 · Michael Sidgmore, Venkat Subramaniam
[00:31:42] S1: You mentioned something in there, transparency, that's so important. I think for the investors in private markets, transparency is increasingly important, particularly as you get to the wealth channel that's learning about private markets. How do you think software solutions like DealsPlus help create more transparency [00:32:01] S2: about assets in private markets? Just having that single source and being able to connect transactions, underlying transaction events, with the kind of proof of those transactions, the documents, and that data flowing into all the other deliverables, whether it's valuations, cap tables, structures, whatever they may be, that is where they transfer it. And giving access to all the stakeholders to that data in one platform. So whether it's a CFO at a portfolio company or your custodian who is verifying your ownership positions or your auditor or a DOT member, so as it comes from kind of a, making sure your workflows and data are correct, and b, giving access to our data in the right format to the different stakeholders. [00:32:48] S1: On the flip side of this, there's obviously certain aspects of these processes that are still manual. What in your mind is the hardest problem to solve right now, and where would you love to see technology fill the gap solving some
00:32:48 · Michael Sidgmore, Venkat Subramaniam
[00:32:48] S1: On the flip side of this, there's obviously certain aspects of these processes that are still manual. What in your mind is the hardest problem to solve right now, and where would you love to see technology fill the gap solving some [00:33:05] S2: of those problems? Lot... Lots of hard problems. If you look at our road map, you'll see there's still lots of hard problems to solve. I think the the hardest problem I would say is if you have softwares like ours and you consolidate all the data, making use of the... This data at the fund level. So this becomes a source data for, let's say, carry modeling. And then this also becomes a source data for some very complex things like investor tax reporting, your k ones in The US. Now, how do you connect all these portfolio level underlying information through the funds all the way to the LPs for your tax reporting? How do you connect that for your carry modeling? How do you enable funds to visualize what the funds positions look like across all the portfolio companies by changing variables? That's the power of a software. So if you have all this data in software, how do you leverage off that? I think those are the sort of very hard problems, but you have to start from the bottom up. But that... That's what we're excited about. Think a lot of tech starts from top down in in private equity. Start from bottom up there. There are some very interesting possibilities. Very hard ones, but they become meaningful.
00:33:05 · Venkat Subramaniam, Michael Sidgmore
[00:33:05] S2: of those problems? Lot... Lots of hard problems. If you look at our road map, you'll see there's still lots of hard problems to solve. I think the the hardest problem I would say is if you have softwares like ours and you consolidate all the data, making use of the... This data at the fund level. So this becomes a source data for, let's say, carry modeling. And then this also becomes a source data for some very complex things like investor tax reporting, your k ones in The US. Now, how do you connect all these portfolio level underlying information through the funds all the way to the LPs for your tax reporting? How do you connect that for your carry modeling? How do you enable funds to visualize what the funds positions look like across all the portfolio companies by changing variables? That's the power of a software. So if you have all this data in software, how do you leverage off that? I think those are the sort of very hard problems, but you have to start from the bottom up. But that... That's what we're excited about. Think a lot of tech starts from top down in in private equity. Start from bottom up there. There are some very interesting possibilities. Very hard ones, but they become meaningful. [00:34:15] S1: Do you think more technology in private markets will start from bottom up, single source of truth on up?