About Mohit Garg

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So far Mohit Garg has created 5 entries.

Limited Partner Reporting Portal

 

Are you fund raising for your next investor close? What’s missing in your deck?

investor-1

Track record and investment thesis aside, a great deck needs to mention how the fund managers can provide a transparent and readily available reporting to their investors. In fact, such is the importance of a transparent reporting process that were there a trade off, a sophisticated investor would be willing to sacrifice some performance in favor of greater transparency. We invest in off market securities after all!

In response, a great wave of reporting standards have emerged recently such as the Institutional Limited Partners Association (ILPA) or European Venture Capital Association (EVCA) reporting standard. Of course, with Fundwave you can already report in a compliance to these and other similar standards. So we decided move to next piece of the puzzle with the Fundwave Investor Portal.

With the Fundwave Investor Portal, your investors can have their data with you neatly organized and available at a tap. On your end, you can easily upload reports, track investor views and make a great first impression to your investors. It’s out for beta┬ánow, so you can check it out right away!

By |June 7th, 2016|Fundwave Blogs, Limited partner reporting|

Tracking Portfolio Metrics

Your portfolio companies are all different. Some are pivoting, others are growing and yet a few are undergoing management changes. How can you help them where they need it?

Analyzing Growth Flat Illustration Concept

Track the metrics. Assume we’ve invested in a promising SaaS business. Finally, the product is starting to witness some uptake and our cashflow deficit seems to narrow each month. You have two options – pick-up the pace of customer acquisition or rake in the profitability. What will you advise your founders?

If your response is “it depends”, you’re absolutely right. Let’s take a look at the unit economics:

Customer Acquisition Cost: $5,000
Lifetime Value: $10,000
Monthly Churn: 3.5%

The LTV : CAC ratio here is just 2x. From the above numbers, the monthly churn rate appears to be a tad too high. Let’s bring it down to say, 2% so our LTV:CAC ratio improves enough to step on the on customer acquisitions.

Simple enough analysis there, but almost impossible if we work only with lagging indicators of success such as revenue and EBITDA. Each business will have it’s own key metrics to track and chances are that you’re already tracking a few metrics in your head or on a spreadsheet. But as you may already realize, no data equals no analysis. How can we make it smooth for our portfolio companies to submit these metrics to us?

Presenting the portfolio metrics add-in for Excel that helps portfolio companies easily submit metrics against your deliverables without leaving the comfort of their spreadsheets. Check it out on the Office Store.

By |February 19th, 2016|Fundwave Blogs, portfolio management|

What every fund manager needs to know about fund administration

fastAs fund managers, we leave no stone unturned in ensuring that we are working our investor’s capital optimally to ensure them a good return, because after all the investor commitments form the backbone of a fund. However, running a fund is not just about placing good bets or hunting those unicorns ;). As a professional fund manager, you need to maintain a reasonable drawdowns schedule, show early distributions and ensure all amounts are allocated to each investor correctly. The notices and reports that we send to investors tell them the progress of their capital investment and that’s why reporting transparency has remained the top priority among institutional investors, and lately individual investors too.

But what all exactly constitutes as fund administration and where does it fit the processes of a close ended fund? The answer is simpler than you think. Let me break it down for you:

1. Investor Allocations
Allocating amounts between your investors based on a variable, such as their commitment or undrawn commitment. Among common exceptions to the rule include ‘excused investors’ (investors don’t invest in particular geographies / industries). Also, capital returned within the defined period may be called back by the fund. Fundwave will let you allocate on variables defined by you and even excuse investors.

2. Investor Closes
When you do another close, new investors pay an late-interest to the fund, which in turn is passed to the investors who had joined in the previous closes. All previous transactions are reallocated as if all investors joined on the same date. Fundwave can do this at a tap!

3. Capital Notices
You don’t want to completely draw your commitments in advance if you want a good carry. Instead, you draw capital from time to time as you make investments. For every capital notice, you need to include bank details and investor contact details. Often you’re also calculating management fees for a drawdown notice and a performance fees / carry for a distribution notice. Fundwave can seamlessly allocate numbers, generate and send capital notices.

4. Management Fees
You need to be able to ask for different management fees from different investors, and the basis of calculation of management fees may switch from ‘commitment’ initially to ‘cost of investment’ or ‘net asset value’ during the later life of the fund. Fundwave can maintain different rates for different investors and calculate your management fees.

5. Carry / Waterfall
This is the money going to the ‘Carried Interest Partner’. You need to be able to calculate your carry based on ‘deal by deal’ and ‘fund as a whole’ basis and make a distinction between ‘hard’ and ‘soft’ hurdles. Some LPA’s have checks to ensure that a clawback situation is avoided. For example, for ‘fund as a whole’ carry, you may assume that all ‘undrawn commitment’ is valued at ‘0’ before you distribute a carry. Fundwave can calculate carry fees for various scenarios.

6. Quarterly Reporting
At the very least, LP’s will need a ‘Net Asset Value’ statement which shows an overview of the growth of their money for the period. You may supplement this by visuals and other supplemental data. Fundwave can automatically prepare your reports for each investor.

7. Fund Accounting
You need to maintain your books for your investments, so that your balance sheet, profit loss and trial balance can be generated. Since you’ll invest in portfolio companies, you will need keep track of number of shares purchased, and transaction currency amounts. When you realize an asset, Fundwave can calculate the cost of sales automatically.

8. Valuations
You will need to value your investments periodically. When you enter valuations, Fundwave will automatically calculate the unrealized gain, even when the transaction is done using a foreign currency.

9. CRM
You don’t want to send a drawdown notice to someone at your investor who has moved roles or is no longer working there. Effectively maintaining a single source of truth will save you from a lot of operational trouble down the line. Fundwave stores investor contacts, bank information and sends notifications.

10. Commitment Transfers
If an LP wants to exit, partially exit or simply invest using another of their SPV’s, you need to be able to transfer the commitment between LP’s. With Fundwave, you can transfer commitment between multiple LP’s at a tap!

So what isn’t fund administration? Apart from core functions of your team such as deal flow management and portfolio monitoring, fund administration typically doesn’t include incorporation of partnerships, legal expenses, and regulatory reporting.

By |September 15th, 2015|fund administration, Fundwave Blogs|

Fund administration for seed funds

This blog post is my original answer to the Quora question: What is the best way to set up a fund administrator for a seed fund that has Limited Partners?

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Source: Private Equity Demystified – Second Edition

The trouble is that seed funds are often smaller in their total assets under management, but not the number of limited partners. Hence, despite that they earn less in management fees, they have to still perform investor closes, commitment transfers, allocations on capital calls, quarterly NAV statements amongst the plethora of things that only a niche section of the industry, the fund administrators, understand. Unfortunately, the supply and demand mechanics have decided a price that may gobble up a significant portion of your management fees.

To solve this issue, we introduced Fundwave, our fund administration SaaS. With the number of small funds on an increasing trend, we realized that there has to be an automated way of doing things that have so far required expensive accountant billings. How automated you ask? Say you’re sending a capital call notice or a quarterly NAV statement. A typical fund administrator, if they are quite good at it, will take atleast 2 – 4 days to allocate, mail merge and send the reports. With Fundwave, 2 minutes is all you need to generate accurate and compliant reports that would make an institutional investor nod in appreciation. Finally, large PE fund administration software is available to everyone, leveling the playing field for access to institutional capital.

Of course, if you’re a new seed fund working out of a co-working space and have little accounting understanding in the team, you should go for a fund administrator. Ideally choose someone who is not running a spreadsheet allocation and running a mail merge everytime they are reporting for you. Manual processes are expensive not just because of the money you pay, but the reputation loss with your investors if an error occurs. Of course, I am happy to refer you to one of our fund administrator clients if you can’t do it internally with Fundwave.

By |April 9th, 2015|Fundwave Blogs, Seed Funds|

Tired of custom reporting? Drop the spreadsheet and delight investors.

Research shows that 76% of investors in private equity funds expect to increase their requests for customized reports. With the average headcount of the finance team already at 20% – 28% of the total, there is little bandwidth left to meet the increased volume of requests.

What if a ‘custom reporting request’ is no longer the horror word that sends your fund accountant into a tizzy at the quarter end? With Fundwave, we’ve made custom reports as natural as they could get. You define the variables, the report design and generate a so called ‘custom report’ in no time.

Yes, each investor can have a different reporting template. You can even ensure that your templates adhere to the reporting guidelines that your investors love, such as ILPA, IPEV or AVCL. Welcome to the next generation of private equity fund operations. Welcome to Fundwave.

visualreport
A sample report generated through Fundwave

By |March 26th, 2015|Limited partner reporting|