73 Strings' Yann Magnan - the opportunity for AI to automate private markets

00:00:00 · Michael SidgmorePlay from here

[00:00:00] S0: This episode of the Alt Goes Mainstream podcast is brought to you by Ultimus, a leading full service fund administrator for asset managers in private and public markets. As private markets continue to move into the mainstream, the industry requires infrastructure solutions that help funds and investors keep pace. Ultimus is a leading full service fund administrator for asset managers in both private and public markets, offering a wide range of capabilities across registered funds, private funds and public plans, as well as outsourced middle office services. Delivering operational excellence, Ultimus helps firms manage the ever changing regulatory environment while meeting the needs of their institutional and retail investors. Ultimus provides comprehensive operational support and fund governance services to help managers successfully launch retail alternative products. Trusted by institutions, investment consultants, registered investment advisors, state governments, and fund managers, Ultimus provides solutions for nearly every investment structure in the marketplace. Visit www.ultimisfundsolutions.com to learn more about Ultimus' technology enhanced services and solutions or contact Ultimus' executive vice president of business development, Gary Harris, on email at gharris@ultimisfundsolutions.com. We thank Ultimus for their support of Alt Goes Mainstream. Podcast. Today's episode is with a founder who's building mission critical valuation and portfolio monitoring software for alternative asset managers. We are joined by Yann Magnan, the cofounder and CEO of seventy three Strings, to discuss how valuation work and portfolio monitoring is moving from manual to automated and why that's so important for the industry. Seventy three Strings has leveraged AI and automation to more seamlessly and cost effectively extract data, monitor portfolios, and streamline middle office processes for valuations. Seventy three Strings works with a number of the industry's top alternative asset managers and has received investment from Blackstone, Fidelity International Strategic Ventures, and Broadhaven Ventures, amongst others.

00:02:21 · Michael Sidgmore, Yann MagnanPlay from here

Yann has brought his experience as a senior member of the Duff and Phelps team, where he was EMEA market leader and a member of the global operating committee, and as a partner at transaction advisory services team to help bring valuation and portfolio monitoring solutions into the mainstream. Yann and I had a fascinating conversation about how technology innovation is impacting private markets. We discussed the challenges with manual valuation services businesses, how to create uniformity and standardization with private markets fund performance data, how AI is changing private markets post investment reporting processes, does automation in private markets help big funds or small funds more? The evolution of post investment private markets market structure. The biggest technology innovation that's still missing in private markets. Why the growth of The Wealth Channel and Evergreen Funds increases the need for more streamlined reporting and valuation. Solutions. Thanks, Yann, for coming on the show to share your views and wisdom on private markets. We're going mainstream. Yann, welcome to the Alt Goes Mainstream podcast. [00:03:36] S1: Michael, very glad to be here. [00:03:38] S0: Pleasure to have you. You've built such an interesting business that is so important right now in a part of private markets market structure that really needs to be revamped in 73. Excited to get into that, but first, I think your background explains a lot of why you've been able to build 73. So would love for you to start with your background and how you ended up in the valuation services world.

00:04:01 · Yann MagnanPlay from here

[00:04:01] S1: Well, thank you. Thank you for that. Thank you for this introduction. Yes, I got into seventy three Strings, which is a technology SaaS business focusing on valuation for alternative investment funds, basically because I come from the valuation industry. I spent twenty five years first at second at one of The US constituency at the point in time called Duff and Phelps, now known by the name of Kroll. And the core of what I was doing was corporate finance and more specifically valuation of non listed assets. So I got into that business, valuing assets for clients and getting to realize pretty fast that a lot I was doing as a consultant, lot I was asking my consultants to do for me, and a lot that I was seeing being done at my clients, everything was manual, manual as in Excel, Google search and email. And I thought that's very inefficient, number one. Number two, that's a bit of waste of the time. These consultants that we hire from the best universities, best engineering school, it's really a waste of their intellectual capabilities, they spend all this amount of time collecting data, going through data, putting that into a model, checking that it's all correct and checking again because I'm a bit of a paranoid guy. So I like to get things checked quite a few times. I was thinking there must be ways to do things differently. And as I saw the technology evolve and evolve pretty fast. Look, I mean, as you can see, I'm a bit older guy. When I started doing valuation in France or working in in my previous firm, we had this very old Mac laptop and Excel was just like a disaster on on that. Things progressed. And then at some point in time, you think there must be ways to do things differently when it comes to valuation. So how do we make that happen? And, yeah, that's basically one of the genesis of 73. The other genesis is that I met with a group of fantastic cofounders that, you know, we are like minded. So like minded people thinking how to progress, how to make things evolve, how to do things differently, while knowing the industry that we address and the pain points that we address really, really well. And I think that was the key driver behind early success, but quite good success of seventy three Strings.

00:06:11 · Michael SidgmorePlay from here

[00:06:11] S0: That's part of the reason why grey hair is good in private markets, because the experience matters, it's important, and understanding how to navigate and work with a lot of big players, work with strategic partners, strategic investors, all of which you have. What were some of the things that you saw while being in the valuation services business that you said this needs to be automated and it can be automated. You're asking yourself the question, can this be automated? And then you figured out how to put structure around that process.

00:06:41 · Yann MagnanPlay from here

[00:06:41] S1: So the first thing that really has struck my mind back probably like already twenty years ago is that I was a more junior valuation guy. I was tasked to work on the M and A assignment. We had to do evaluation of a business and to do that, we had to develop private business and we had to develop benchmarks to to public companies. I don't remember what the business was, to be honest with you, but I remember private business, we had a peer sample of private companies and it was like five, 6PM at night and we had to speak to the client the next day with some ideas and so on. And so I turned to my junior, I tell him, okay, can you assemble real quick benchmarks of these peer companies, revenue growth and EBITDA margin and various financial ratios and so on, and collect that information from brokers reports and so on. And the guy then, yeah, but it's going to take three days. I mean, come on, why? Why is that? I mean, you have to go through all this paperwork, all these amount of documents and find for relevant data and then plunge this data into a model and then cross check that everything is correct. Yeah. It's going to take two to three days. And I thought, mean, that's nonsense. How can that happen? Of course, that was some time ago when all the data sources like Cap IQ and FactSet and Affinity came to market with a way of looking at that data in an automated way. But still I've been thinking there should be a way for people that have to value these non listed assets that have to take a look as to how they compare to other type of companies to pull in the information in a much faster way, to pull in the intelligence in a much faster way, to go through the vast amount of data and documents that you have to go through to collect and pick this relevant information in a much faster way. And that's where we started thinking with your colleagues. I mean, AI should probably be helpful there, actually. And... Yeah. So that's one of the starting point.

00:08:32 · Michael SidgmorePlay from here

[00:08:32] S0: One question that comes up from that is, how much is the lack of uniformity a real challenge? There's lack of uniformity and standardization around how funds may value companies' assets and their valuations, how they look at their revenues, their valuation multiples, their methodologies. There's so much difference in the way that firms may apply their own valuation methodologies. Can you standardize and create uniformity within the valuation process? Or is it automation will get you part of the way there, and then there will still be a large manual component to this?