Tim Flannery, Alex LaPlante and Ben Doran were working together on the Map Investor Services team when they realized that investing in startups was a taxing (no pun intended) process. It involves aggregating unstructured data across various financial systems and creating subscription agreements – contracts that investors fill out to invest in funds. Often, this unpaid work led to mistakes and took an incredibly long time, Flannery says.
“It was a nightmare to fight,” Flannery told TechCrunch in an email interview. “We also noted problems with coordinating investors with a single source of truth for the construction and incomplete or inaccurate subscription documents.”
Your solution Passthrough is a web-based fund automation workflow tool for investors. In the year Launched in 2020, Passthrough — which Flannery, Laplante and Doran co-founded after leaving Mapo — facilitates investor onboarding for private funds, notably through subscription document processing, identity verification and anti-money laundering compliance.
“We make it easy to invest in the private markets, just like Robinhood did for public stocks. Even though this asset class has been around for decades, it’s not built to handle this crowd of investors,” Flannery said. “Signing up for Robinhood? It takes two minutes. Investing in a VC fund? Every time you invest, you must fill out a 200 question questionnaire. The forms are not standardized and not every question applies to every investor. Investors miss questions or answer the wrong ones and then have to do it all over again… We’ve built a TurboTax-style workflow where investors get one question at a time and get the questions that matter to them.
There is definitely interest in the idea. Passthrough today announced it has raised $8.4 million in Series A funding led by Positive Sum, with participation from Motley Fool Ventures, Broadhaven Ventures, Company Ventures and Great Oaks VC. Flannery said the round — which values Passthrough at $50 million — will be dedicated to product R&D, marketing and Passthrough’s core offering.
At a higher level, Passthrough provides due diligence and ongoing risk management for investors when they enter a fund. It achieves this with an identification system that uses more than 200 data points to create an investor profile, which can be quickly applied to any compliance and workflow on the Passthrough platform to save time. (Of course, investors can delete their data if they want.)
“Most fund managers today do not have an onboarding solution. It takes days or weeks for investors to fill out documents. On Passthrough, it takes about twenty minutes if you do it in one sitting,” Flannery said. “We asked investors more than 36,000 specific questions and used those questions to create a model of the data collected across all the funds we operate… Investors define their beneficial owners, we check them against sanctions lists and fund managers can assess their perceived risk, assigning investors to the fund and tracking their risk over time.” .”
Passthrough competes directly with companies such as Anduin and Plus Subscribe, which offer a variety of investment fund services, including client relationship management systems, investor portals and data warehousing. To stay ahead, Flannery said, Passthrough plans to expand into the enterprise with a robust new API that allows anyone to grow on the startup stage. Later this year, Passthrough will be fully embeddable, he said, allowing API clients and partners to control the end-to-end user experience of investment opportunities.
“[Many of these enterprises] Using trade order systems developed in the 1990s to handle investment inquiries and send and receive information from customer relationship management systems and investor portals, Flannery said. “Passthrough’s open API helps these investors connect the dots while having a consistent onboarding experience, no matter where they come from.”
Passthrough has rivals in fund managers such as AngelList, as well as law firms such as Cooley Vanilla, Kirkland & Ellis Funded and Gunderson. But Flannery argues that they only offer point solutions — and then suggest solutions that are challenging for investors because their data is trapped within each provider.
“From the fund manager’s point of view, you need to work with one first. Then, you need to accept their formal forms. And if someone breaks out of shape, they’re probably out of luck,” Flannery said. “Meanwhile, we can work with any provider and build workflows completely customized to their needs… Our goal is to enable Passthrough, whether investors are investing in a venture fund, private equity fund or any other alternative asset. . Our goal is to be the default.”
It’s paying off on that front. According to Flannery, Passthrough has invested billions of dollars for more than 12,000 unique investors and more than 250 clients.
Flannery says the pandemic has fueled interest in the space. “Electronic registration documents were a curiosity until no one could find a printer,” he said. “Fund formation has exploded and we’ve developed a seamless workflow automation tool that makes it easy for everyone to invest.”
Asked whether the current challenging investment climate could affect growth, Flannery said it would not. There is no evidence of a slowdown in business. Actually, Passthrough didn’t need to raise it but decided to because it “felt like the right time to be aggressive,” especially when Passthrough plans to double the 26-man headcount.
“When we expanded, we did it with a three-year plan,” Flannery added. “Then we can make a decision if we want to pick it up again.”
