Now that you’re on your way to having a complete view of your investments, how are your LPs doing?
Can you easily communicate with them? Do you have a quick way to view past communications with them? Can you easily see each LP’s portfolio, their investments, contact information, and legal entities? Are you easily distributing important fund information to your LPs?
Pain #4- LP Communications is time consuming (and therefore costly!) and lack consistency.
LP communications; a vital part of your operations and usually a time sensitive manner. Being able to provide information in a clear, easy to access, timely way displays the level of professionalism and consistency needed in the investment industry today.
I need an LP portal that is easy to use and will provide and maintain a professional image.
Wouldn’t it be great to provide a secure portal for you and your LPs to share information? And even better, receiving automated notifications when information is available for you? Having ease of access to information on both sides of the investment allows your firms professional image to shine through. A portal can allow you and your LPs to view the history of the communications and the information sent between your firm and the LPs and provide a record of contact information.
There is no way to automatically disperse K1s! It takes up a lot of staff time.
Tax season is busy enough without worrying about getting all the proper information to your LPs. Automation tools such as dispensing K1s frees up staff time, gives you the peace of mind that LPs not only have their information, but it is done in a timely, professional way. This provides a tracking system of sorts as well; you know it was sent and received, but can also retrieve it again if need be. (Or better yet- LPs can use their portal to retrieve it themselves!)
Too much time spent on fund updates!
Sending out updates to LPs is a time consuming process, as it is usually done quarterly and it involves communicating to quite a few people. Automating emails that are sent to all LPs when a fund update is available is a great way to gain some time. This is another great reason to provide a portal for you LPs; it takes the responsibility of maintaining corporate records out of their hands, while making a history of updates readily available to all parties. Assembling a detailed breakdown of the fund metrics (total called, interest, etc.) will also prove to be a time saver.
Living in a fast-paced, information overload, world there’s no question that tools described above should be available for your LPs. Get more information about the solution to have painless LP communications.
So we’ve already touched upon having a complete view of investments and how tools such as filtering and sorting improve visibility and organization. But there is a more fundamental problem that many investment firms are facing ― the ability to view specific information across your portfolio. The flow of documents has been increasingly difficult to keep track of and organize. Partners tend be responsible for a couple of portfolio companies and receive those companies documents and updates and everything is great, right? Not exactly.
Pain #3- I have no way to see specific information across my WHOLE portfolio.
Not being able to see information across the whole portfolio is just another challenge we hear from clients. Having a partial view of the firm’s portfolio weakens the ability to ascertain the real state of the entire portfolio. Solution: storing all investment documents in one solution that allows for sorting, filtering, and searching. But why is it necessary to be able to view this specific information across your portfolio?
Records cannot currently be organized by specific information types.
You may already have folders in email or on your hard drive and the folders may be organized. Let’s say you have them sorted by investment companies. And in that folder you have more folders of board packages, financial reports, etc. Or maybe you have your folders set up by document type, and then play the “find the investment company” game instead. Wouldn’t it be easier to keep track of the whole portfolio and be able to get a different view depending on what is most convenient at a specific point?
- See by investments - would allow you to see every company in your portfolio, but easily access the documents you need.
- See by date - would allow you to quickly access the newest information to catch up, prepare for meetings, or see everything you were doing at a specific time period.
- See by document type - would allow you to see all types of documents that are in the system and know which investments have which documents available.
- See by sector - would allow you to break down investments by industry or sector. Let’s say there are new regulations for the clean-energy industry; this is a great tool to know who would be affected and contact those investments quickly.
Ok so now you should be able to find you documents, but can you see your WHOLE portfolio in a calendar grid view? Do you know if portfolio companies are giving you their financial reports and board packages when they should be? Do you know when they are due?
- A “birds eye view” grid of the year and portfolio companies makes it much easier to see the status of companies and if reports are available. At a glance, you would be able to know whose reports are done, whose are not done, and when you are owed more information. I’m sure you can appreciate being able to look at one screen and being able to access the board packages and financial information for your whole portfolio. Just imagine all the time you’ll save from just not having to search across your portfolio!
These are just a few more solutions to build your complete view of your WHOLE portfolio. Find out more about these solutions.
Let’s continue with the theme of not being able to get a complete view of your investments. What happens when there are interruptions in business or in the company and you don’t have a complete view? Like it or not, issues, such as staff turnover, information not getting backed up or being completely lost, lack of access to information, and natural disasters do happen. Nowadays, it’s a common practice among businesses to have comprehensive approaches, or business continuity plans, to minimize these disruptions. But what about your firm, have you evaluated how your company will deal with these issues if they arise? Even if everything is running smoothly now, have you addressed your points of potential weakness? Do you have a business continuity plan in place as a preventative measure? Where will your critical investment information be if something goes awry?
The flip side of having a business continuity plan is actually having business continuity; a way of ensuring your clients and partners that they will have access to their information if something does goes wrong. This could include many of the daily routines of project management, keeping good communications, keeping things backed up and keeping updated reports. Good business continuity tends to be a manual and costly process, making operations harder to maneuver, which brings us to the next pain we relieve for our clients.
Pain #2 - There is a lack of business continuity in my office/ operations are hard to control.
- Critical investment information is kept in one place and not backed up.
Whether the information is stored in someone’s email, on one person’s hard drive, or in a filing cabinet next to your desk, there are numerous ways that information can easily become inaccessible. Is your information backed up? If the information is in the cloud, is it backed up on multiple servers? Are the servers on different power grids? If information is lost, one way or another, is recovery possible? If critical information is lost, it is imperative that recovery occurs in a timely fashion.
- There is no business continuity plan/ there is a plan, but no business continuity.
If you do not have a business continuity plan in place for your critical documents, start there. It is important to have all critical information in a secure, backed-up, easily accessible place. If you have a plan in place, is your company practicing the plan in a way that LPs and colleagues are comfortable knowing how to access their information if something goes wrong? Communicating with your LPs and internal partners regularly, to keep everyone in the loop, is a significant way to establish business continuity, good governance and consistency. If you have your information in the cloud, providing a user portal for access to the information is also a key way to provide ease of access to information.
- The daily operational tasks of properly managing my investments are getting hard to handle.
Trying to manually maintain work flows of investments can be extremely time consuming, not to mention, costly to the company. Providing a good flow of communications between the company and LPs and investments is already quite a feat. Now add on the responsibilities of keeping all the information backed up, organized, readily available to everyone, in reports to be analyzed, etc. And then when a document is updated, starting the process again…it’s exhausting!
What do I need to solve these issues?
Organizing information on a secure cloud-based solution, backed-up on multiple servers (and on different power grids) ensures the security of information and its timely recovery in the event of data loss. Online user portals make accessing information easy but also make it possible to segregate information by role. Automated emails can also help the daily operational responsibilities. Capital calls, board packages, K1s, etc. should have reminder and chaser emails setup. Notification emails of when new or updated information is put into a system are another great way to keep everyone on the same page.
Find out more about how DocDep can provide the solution. Or get a deeper view into the software by requesting a demo.
With the increasing strength of more angel firms and the joining of forces between VC, PE, and Angel funds, the venture community is starting to shift. In addition, changes in the industry, such as crowd funding and the US JOBS Act, signed in April of this year, are making it even easier for startups to get funding, causing VC and PE firms to adjust their way of doing business. With more regulatory pressures, firms need to keep an accurate record of their communications with portfolio firms. At the same time, portfolio firms are sending an increasing amount of information to investors.
The swelling of legal documents, board packages, and other materials being sent requires significant organization. Keeping communication flowing between all partners becomes time-consuming, not to mention the increased chance that important information might be stuck in someone else’s email or laptop.
With the shifting in investment patterns, there are bound to be growing pains as companies adjust to the new influx of paperwork, reports, and communications. DocDep has been hearing a common thread of “pain points” among our clients. Over the next 2 weeks, the DocDep blog will be focusing on alleviating these pains.
Pain #1 – Inadequacy at seeing a complete view of investments
As mentioned, the amount of documents that need to be stored is increasing. Email folders or other storage repositories are not sufficient.
- I can’t get to the information! It’s in someone else’s email or hard drive.
When important information is stored in personal filing systems, major issues can result. Whether information is needed urgently or last minute or staff turnover has occurred, portfolio company materials needs to be accessible. One way to alleviate this pain is to use a system that allows for secure, multi-user login.
- My storage tool does not provide an organized structure for me to view, sort, and filter.
Although email folders and hard drives provide storage, they lack an organizational structure. The information may be there, but it can still be hard to find. There is no way to sort and filter or get an overview of the entire portfolio. Using software that provides a pre-defined organizational format allows you to see what kinds of documents you have stored. Sort and filter functions are a great ways to view investments by what stage they are in what information is most recent, or how the portfolio is doing sector by sector.
- I can’t easily get a complete picture of all my portfolio companies. I can’t get a quick overview of their information and financial documents.
Again, even though the documents are stored somewhere, that does not mean that they are easy to find. It also may not be easy to put them together to get a complete view of how your investments are doing. Finding and analyzing financial documents becomes an especially time-consuming and manual process. Using a tool that allows snapshots of information for investments and documents is a great way to remind yourself of key information that you would need. A bird’s eye view of financials helps with updates, capital calls, and other financials.
DocDep’s Sonar product lessens these pains for VC, PE, and Angel firms. Download our checklist to see if your current storage system is doing its job! Follow the next 4 posts to see the rest of the pains we help reduce.
It’s no newsflash that the financial world is tightening; government regulations are being put in place, shareholder demands are increasing, and competition for raising capital is becoming stiffer. As alternative investors are being put under the microscope, transparency and good governance are now a necessity. This increased scrutiny has created increased demand for automation or “straight through processing” to be put in place.
As a result, there has been a progression of VC and PE firms investing in “back office systems” to help manage and automate workflow of things like capital calls, LP communications, and accounting. With cloud-based and SaaS vendors steadily making their mark in the industry, this structure and automation has become more readily available. So it seems only natural that front office automation would be next. It is practically essential to leave the world of manually building Excel spreadsheets and storing in email folders. As of now, financial information tends to be kept in long and cumbersome spreadsheets. This creates information loss, inaccuracies, and inefficiency. A structured, automated, easy to read system would not only takes care of these issues, but would offer the good governance and transparency companies need today.
“In another year, using automation in only half the office will just not cut it”, says Farid Naib, an experienced investor, entrepreneur, and DocDep CEO. “Adopting a more complete system will provide exponential benefits to VC/ PE firms. Increased automation will allow firms to more easily comply with standards such as Dodd-Frank, and improve business continuity and operational efficiency.”
This new operational efficiency is available with cloud-based, structured systems, such as Sonar from DocDep. With tools such standard and ad hoc report writers, predefined and customizable snapshot matrix views of investment information, and sorting and filtering capabilities, the front office can join the automated world.
Are you hoping to one day sell your company for millions of dollars – maybe even someday soon? So you whip out your cap table to look at your shares and percent ownership. But wait! The numbers aren’t adding up. So you start looking for old documents to see where the discrepancy started, but where are they?! All of a sudden, a quick look turned into a timely process and you’re doomed to the headache of digging up all the old data and searching cap tables for discrepancies.
Don’t wait until it’s too late! SmartCap offers a quick and easy way for you to organize your documents for each round of financing. By adding “details” to each round you can quickly and easily access underlying agreements and term sheets.
When adding or editing Classes and Securities simply add the necessary attachments and your details will be available to view and review whenever you want.
If you need to add option grant documents for individuals, you can do this at the Equity Holder level virtually eliminating the issue of the option grant not matching the shares in the cap table.
You are able to view all documents associated with a deal by clicking on the details for that class, or you can expand your view and see individual’s documents.
Not only is this a great organizational tool, but it also allows you to reconcile documents and information at each round of financing, removing any question of whether or not you’re building on an accurate foundation.
Need help reconciling your documents and cap tables? DocDep will do it for you with our Cap Table Audit service!
We wanted to share with everyone a few changes that DocDep is working on to enhance our cap table functionality. Most of these enhancements have come from requests that we received from the 150+ firms using our cap table software.
Soon to come, a new view! You will be able to view by event; a view that mimics what we often see in the spreadsheets that our sent to us for Cap Table Audits service. We have also been asked to improve option vesting and our tracking as well. This functionality should be out in early May.
Our CPA and Auditor, Brandon, spent this past weekend working with a firm on their cap table, which featured four preferred rounds of financing, including conversions of previous rounds into new rounds. As a result of this, he has asked us to add some functionality allowing you to buy shares of a round at different prices.
The most complex update we are working on is our waterfall functionality. This is a complex function, with all sorts of hurdle rates, preferences issues, option strikes and other things to consider. Luckily, our CEO Farid Naib, has an extensive background and a few papers published in derivative math, but even he seems to be looking for more aspirin. We’re developing to take those headaches away!
Cap table Horror Story of the Week: One firm transposed the number of shares and dollars, and then incorrectly reported percent ownership. Don’t let this happen to you.
For our VC and PE firms, we have been hard at work helping our clients get out over 15,000 K1s. We are very glad that tax season is over!
As you may have heard, DocDep is now providing a free online cap table, SmartCap. Your cap table is an extremely important part of your company. Even more important is that the cap table is set up correctly. SmartCap presents you with an easy-to-use application for organizing your cap table.
What information should you start with when you set up your SmartCap cap table? First begin with the Classes and Securities. This allows you to differentiate the specific types of equity that your company has issued, whether options, common stock or preferred stock.
Next enter the company’s Equity Holders. Holders may be any individual or entity that has ownership in the company or has the right to purchase ownership.
Last record Equity Events and Allocations. A new event is any instance of new equity issued into the company, for example a new round of investment or increasing the option pool. After your event is created, then you can issue equity to the holders. Here you can input the class name, number of shares, and share price. Now your SmartCap cap table has been started!
SmartCap provides you with additional easy-to-use functions, such as the “What If” tool, which allows you to enter hypothetical rounds of financing. This will show you how your company’s ownership would change were you to take on additional funding with specific terms. You can enter your What If scenario in Pre-Money Valuation or Percent Ownership.
SmartCap is flexible, allowing you to look at your cap table any way you want. You can view by holder or by class, by all shares or by voting shares. You can view your table with pre and post equity events and with or without accrued interest. SmartCap also supports export to Excel.
If you haven’t already signed up for the free cap table you can do so by clicking here. For more information you can also view our SmartCap video.
The cap table is the most critical element in an investment deal between a VC company and potential portfolio company. It defines equity ownership and investment stakes for a company and sets forth how holders are compensated. And yet, it might also be the most misunderstood – and frequently wrong – piece of the deal as well.
This week, we are offering a remedy for the confusing and error-prone capitalization table: A free application that will build tables for investment-backed companies. It will allow equity holders to see their ownership in common and preferred stocks and other securities, calculate how ownership changes under different scenarios, and analyze convertible interest rates. All of these features are available under the free model – a few more bells and whistles come with premium accounts. Click here for the full list of features.
The cap table, which details equity ownership and debt obligations at a company, spells out who owns what in a company, how they are compensated, and what happens to those ownership stakes under different events. A good cap table can provide more information than any marketing material or website. Many people first realized that the music sharing site Spotify had huge potential when TechCrunch found its cap table.
The new cap table is a logical extension and development of the applications we have worked on over the years. When DocDep started two years ago, our only offering was online software that would organize documents and make them easy to share. But as we’ve grown, we’ve learned that the true value of what we provide is not in the virtual file cabinet, but in the giving people the ability to make their information clear and accessible. In short: to make it useful. The cap table might not seem like the most pressing issue when you have fires to put out, but a good cap table utility that can prevent some of those fires from flaring up in the first place.
Happy Holidays and Happy New Year from DocDep! 2011 was an exciting year for us, with a shift in strategy, new products and exciting growth. And 2012 promises much more, especially with the arrival of Dodd-Frank. You could be forgiven for thinking that 2011 was Dodd-Frank’s big debut. Between the Republican presidential candidates lambasting and promising to repeal the law and Congressman Barney Frank’s retirement announcement, the 2010 Wall Street Reform and Consumer Protection Act has received a lot of attention this year. But 2012 is the year that Dodd-Frank compliance will really come to the fore. Next year, we’ll be done talking and financial agencies will have start acting.
Many Provisions Still Coming
Many major provisions of the Act have not yet taken effect, including the requirement that firms with more than $150 million in assets under management register with the SEC. Under this requirement, the SEC can require a firm to produce many key documents – everything from corporate governance policies to financial records to proxy voting policies.
This might seem like a daunting list of requirements, making the SEC as intimidating as the IRS. Steve Randolph of the consulting firm Oakbrook Solutions notes that this will even ensnare some family-owned firms. But investors and fund managers should not fret. All that's required to meet this provision of Dodd-Frank is some strong, clear corporate governance and document management. DocDep has developed an application that will help firms develop this organization and reporting system. The application offers a storage and maintenance platform to keep track of corporate and financial records, secure locations for marketing materials and portfolio management tools.
We know that Dodd-Frank is very controversial and sure to cause a lot of headaches as it rolls out. But for alternative investment firms, SEC registration does not have to be very onerous. Leave the real worrying for the rest of the bill, which, according to Bill Sheridan of CPA Success, is only one-fourth enacted. Including that darn Volcker Rule!
Nevertheless, all of us at DocDep hope you and your firm have a happy and prosperous new year!
(Image: Wordle of the entire text of the Dodd-Frank Wall Street Reform and Consumer Protection Act)