Securing Private Investments: The Rise of Digital Infrastructure in Fund Management
In the high-stakes world of private capital, investment management software solutions are rewriting the rulebook. Emerging managers are often searching for better, more innovative ways to interact with investors, from streamlining capital calls to fortifying financial transactions. Born from the frustrations of outdated B2B payment systems, for example, Verivend has evolved into the “Venmo for private investment funds” by taking on the task of empowering emerging managers to unlock unprecedented efficiency and scale. We sat down with Verivend founder, Rodney Reisdorf, to discover how this game-changing platform can help you maximize your fund's potential, dramatically reduce operational costs, and create a seamless investor experience that sets you apart in the competitive private equity landscape.
1. Founding Story
What inspired the creation of Verivend?
We originally founded Verivend with a mission to transform B2B payments. My co-founders and I have always been part of small companies that have seen growth into larger companies through acquisitions, and we witnessed firsthand that payments were broken. With mid-size to larger corporations, there is still a lot of paper and checks, manually sending invoices, and going to the bank. We said, “You know what? Let's build a modern B2B payments company that brings the same level of efficiency and transparency as Venmo ~ but for businesses.” We launched into the market in May of 2020 and focused on verticals that were historically outdated ~ anything from industrials to manufacturing, from logistics to trucking. We had some organic expansion into legal and doctors’ offices and started making decent progress in a lot of different directions, but it was in a lot of different directions. We really didn't feel like we were making meaningful progress in any one direction. I always say one of the hardest things for a founder to do is say “No” because you never know which “Yes” is going to lead you to a great, successful outcome. So we were just saying “Yes” to all these different verticals, but it was just spreading ourselves too thin.
We created our own Aha! Moment when we raised our seed round in October of 2021 after self-funding for the first year and a half. It was a no-brainer to use our own platform because we saw the efficiency that it was bringing for payments for companies. I said, “Well, you know I would be a fool if I didn't ask my investors just to fund on our own platform.” That is really what put us on the trajectory that we are on now.
After we raised our seed round on our own platform, we realized firsthand how great of an experience it was, how frictionless and effortless it was to raise a round of funding. Then our investors, who are mainly smaller angel groups, came back to us and said, “Wow! That was a great experience using your platform to invest in you. Can we use Verivend for our own syndicate and operational needs? Because we are sick and tired of the manual effort, the pen and paper, and just the old school way of doing things.” So we had this epiphany when we realized nobody else is focusing on purpose-built payments infrastructure for the private markets.
In early 2022, we made the strategic decision to really narrow down and solely focus on being that Venmo for private capital, and it immediately changed everything. We found our voice and our purpose in who we are, the customers that we were serving, and the value that we were bringing to them.
2. Value Pillars
What are the three pillars driving Verivend's mission?
Pillar #1: Allowing GPs (General Partners) to get back to being GPs and the reasons that they became GPs ~ finding deals, managing their deal flow, closing deals, and then working with those portfolio companies to get the best returns for their investors.
Pillar #2: Provisioning for GPs to create frictionless and delightful experiences for their LPs. This includes being able to have an LP (Limited Partner) invest as easily as sending a payment on Venmo or buying something on Amazon. This is key to not only the overall investment experience with that GP but also to that trust and credibility which is so crucial for emerging managers to build in those early days.
Pillar #3: Eliminating security and fraud risks by removing the need to share sensitive bank account information for both the GP who is calling capital and the LPs who receive the return capital when there is an exit or liquidity event. The status quo is the GP or their attorney reaching out to all the LPs, collecting their bank account information, and then manually sending out the payments. Verivend handles both the incoming and outgoing flows of capital, making it much more efficient and eliminating the need for both GPs and LPs to share their sensitive banking information with each other.
3. Security Considerations
How does Verivend safeguard sensitive financial information?
Security and the mitigation of fraud and risk are big value drivers for us. The old school way of doing things, and really the status quo of doing things in terms of raising and deploying capital, is for the fund to provide each LP and investor with their capital call notice with your bank account information on it. Now, this is typically provided through email or maybe posted to a static document portal. At the end of the day, there is all of this incredibly sensitive bank account information floating all over the place. Capital calls and private market transactions are a growing target for cyber criminals because they are the big ticket items. A cyber criminal is going to target the six, seven, eight figure transactions, rather than the small retail transactions.
What we have done is provide a much more secure way for capital to be raised and deployed without having to expose sensitive bank information. In our personal lives if we owe each other money, I would just send you a payment on venmo or paypal, you would receive it, you would have your own bank account linked, and you would never have to share it with me and vice versa. By preventing people from needing to share their sensitive banking information, it really helps to eliminate a lot of the fraud and the risk. There is also the business of email compromise: every time there is a compromise of a capital call notice going out, the average amount defrauded from investors is $809,000. This is an eye-opening amount. As an emerging manager, do you want to be putting your LPs at that big of a risk? To have to worry about if this is a legitimate capital call notice or fraudulent? Are the wiring instructions accurate? Is the money going to the right place? No. You want them to not only feel secure and confident in you as an emerging manager but also secure and confident that their funds are going to the right place.
4. Workflow Process
What is the workflow for new investors?
If an emerging manager is raising a fund and onboarding new LPs, the process is frictionless on both sides with Verivend. The GP is able to set up the entity on the Verivend platform in a matter of minutes, importing all of the LPs who are going to be investing in the fund or deal syndicate. All different entity types are supported. Simply upload each individual LP’s capital call, and it is all digitized on the platform. With one click, the GP is able to initiate an automated email notification immediately to all of those LPs with the capital call for XYZ Fund.
From the LP perspective, they receive an automated email notification immediately with XYZ Fund capital call and access the platform with one click. We pre-create an LP portal for them, so that there are no hoops to jump through, and they can view that capital call link their bank account and fund it within a matter of seconds. In and out. We are really proud of breaking down all of the friction points between a GP and their LPs investing. Our philosophy is one of the best ways to get LPs to open their wallets, invest, and continue to invest is to remove all those friction points. Every single point of friction is a point where that LP can change their mind and say, “You know what? Maybe I do not want to invest.” Just like Amazon makes it incredibly easy to buy things, if you make it easy to invest, then you are going to help your LPs. Invest easier and continue to re-up with you as an emerging manager.
5. Partnership Paradigm
How is Verivend transforming GP & LP dynamics?
The use of Verivend as an automated platform may positively transform the dynamics between GPs and LPs in terms of cost and efficiency. By automating capital calls and fund management, GPs can avoid paying attorneys hourly rates for tasks such as chasing investors for money or reconciling escrow account funds. This allows legal professionals to focus on core legal components rather than administrative tasks. Additionally, the automation improves the overall relationship between GPs and LPs by eliminating the need for GPs to act as collection agencies, which can be uncomfortable for both parties.
Our platform digitizes and automates the entire capital call process, sending reminders to LPs and providing GPs with full transparency on the status of investments. The web-based, mobile-optimized system allows LPs to access and respond to capital calls from any device without downloading an app. This increased efficiency and accountability has led to significant improvements in fundraising speed, as evidenced by a customer story where a $20 million equity raise from 110 LPs was fully funded within 24-hours. The automation streamlines the entire process, making it much more efficient than traditional methods and allowing both GPs and LPs to focus on more important aspects of their partnerships.
6. Customer Base
Who benefits most from utilizing the Verivend platform?
We support GPs from private equity, venture capital, real estate, and even some hedge funds. Speaking from the founder perspective and knowing that you really need to nail and scale or land and expand, our ideal customer profile is emerging managers, early stage VCs on Fund I, II, III, and typically ones that are raising their capital base from friends and family, high net worth individuals, and retail investors. We also have many customers that have institutional investors on the platform. We have found that there is a direct correlation between the number of investors and LPs that you are raising funds from and the value that you get out of Verivend. Typically, our average customer has anywhere from 30 to 50 LPs in a given fund or in a given syndicate. Then, they grow from there; we have customers that have dozens to hundreds, and some of our largest customers have just these massively curated networks that they spent so much time building to thousands of LPs. The customers that are using it with the greater amount of LPs are the ones that are getting maximum value out of it, because that is all the more work that we are taking off of their plate.
We have even heard feedback from our customers saying, “Wow! I can really scale my LP network with something like Verivend, because I do not have all of the incremental costs and inefficiencies of adding LPs to my syndicate or my fund.” In the traditional world without Verivend, however, GPs and emerging managers are typically trying to keep their LP count as low as possible, which is really counterintuitive to how the private markets function. There is a continuous massive influx of retail investors entering the private markets and looking for better returns than the public markets. Enabling an emerging manager and GP to be able to cater to the changing dynamics of the private markets and the influx of retail investors is key for them to manage much more efficiently with our platform, rather than arbitrarily keeping an LP count down to as small as possible simply due to lack of bandwidth to manage them.
7. Customers’ Reactions
How are customers describing their Verivend experience?
Many of our customers have said, “Verivend is the Venmo for private investment funds” and “Verivend is Venmo for GPs” and “Verivend is life changing in terms of payments and capital management automation.” It is such a leap forward from the status quo of the legacy ways that capital has moved. These are the reasons why we are doing what we are doing and why we are so proud that we have now processed well over a billion dollars in transactions. We have a nationwide network of 150+ GPs managing ~700 different deals, funds, and syndicates with over 12,000 LPs and investors ~ all receiving great benefit from using Verivend.
8. Trust Alchemy
What is the secret to nurturing investor relationships?
In my experience raising multiple rounds of funding for Verivend, I have learned that while automating operational aspects like capital calls is valuable, you cannot automate the crucial groundwork of building trust and relationships with investors. My strategy focuses on identifying an ideal investor profile ~ people who align with our mission and are willing to back me personally in the early stages, rather than just the company or fund thesis. This approach applies whether you are a founder raising for your company or a GP raising for a fund or syndicate. It is all about relationship building and the softer side of investor nurturing.
I have found that complementing this relationship-building with a professional approach to investor management is key. Our platform not only automates the capital calling process but also helps emerging managers and GPs professionalize their investment operations. This professionalism is vital in maintaining and building upon the trust established during initial relationship-building efforts. By providing a more sophisticated system for managing investments compared to traditional methods like emails or static documents, we allow managers to present a more credible and trustworthy image to their investors. This reinforces and grows the relationships cultivated in the early stages of fundraising, avoiding the risk of eroding hard-earned trust through unprofessional practices.
9. Product Roadmap
What exciting developments are on Verivend's horizon?
One exciting item on our product roadmap is the ability for GPs to raise funds internationally with multi-currency support. As a GP and emerging manager, you can receive and send funds from any currency today; however, our vision is to support global GPs who are raising funds in currencies beyond just USD. This will give GPs and emerging managers the ability to raise and store funds in multiple currencies from LPs around the world.
Subscription documents are also on the Verivend product roadmap. Payments are the central part of what we do. The differentiator is that we are doing what nobody else does. We do not want to just represent that one slice. We have great pull from our customers in the market asking, “Can we do more on the platform? Can we share docs? Can we do subscription agreements? Can we onboard our investors?” We are thus strategically expanding outward from the payments to being able to issue and receive capital and disperse capital into supporting all of the other areas and items of the workflow to create a true end-to-end experience for both GPs and LPs.
10. Tech Transformation
How is technology reshaping fund management?
I see a number of ways that GP fund management is going to be better served with technology. From the perspective of a payments platform, that is really the next frontier. That is the untapped, unaddressed, unanswered area. Despite all of the advancements of things like PayPal and Venmo in our personal lives, the private markets have been greatly underserved in terms of financial infrastructure. Not only in terms of transactions of capital raising and distributions but also looking ahead to things like interest bearing accounts, so that you know, people who have money in the Verivend platform can keep money in there and get the same benefit of keeping it in a interest bearing bank account; capital call lines of credit, being able to even further accelerate the deal closing timelines and using our own data to underwrite customers who would want a capital call line of credit, so that if you have an allocation in a fast moving round of a rocketship-growth company, you do not miss out on that or wait for your LPs to fund; and escrow services, having those capital calls paid over time from your investors. We are looking ahead to the other synergistic areas of the financial infrastructure, from which our customers and their LPs are going to be able to benefit.
11. Minefield Map
What pitfalls should emerging fund managers avoid?
I liken a new fund manager to a founder, because we are all entrepreneurs and operators, probably not realizing the level of effort and the ongoing effort that it takes to run a fund or syndicate. They could be more efficient and automate things or just go with the status quo and pay a very high cost provider or administrator to do all this. The reason that those things are high cost is because there is no secret sauce behind the scenes there; those high cost administrators or providers are still having to go through all the manual effort of sending out capital call notices, following up with people manually, reconciling very opaque transactions in a bank account, and managing disconnected bank accounts. Thinking differently about how they can not only differentiate themselves as a new GP or a new fund manager but also how they can do it in a much more efficient and cost effective way. As a new fund manager, before you raise your first capital, you do not have a bunch of money sitting around to pay for fees or admin expenses. I advise new GPs and emerging managers to look at ways that they can not only run their operations as efficiently and cost effectively as possible but also do it in the most professional and trustworthy ways with their investors.
12. Competitive Edge
How can new GPs differentiate themselves in a crowded market?
Obviously, your deal flow is going to be one big point of differentiation, as well as the returns that you deliver. What deals are you getting access to? What can you get into that no one else can or sooner than anyone else can? Then, ultimately, what returns will you be able to give back to your investors? The main point of investing right is to hopefully get out more money than you put into it. The other part is the ability to differentiate yourself based on the investor experience. I always use this example: if you have two GPs who are raising the same amount and investing in the same types of assets, but one is doing it the traditional way through the status quo of emailing out PDFs of capital call statements or putting them on a shared drive where the LPs have to log in, download it, print it, go to their bank, log into the bank to send their wires in, and then worry without any sort of feedback loop in place versus a GP that is using Verivend to fully automate this and provide their investors with a frictionless experience ~ I think the one that is using Verivend to automate all this is going to be the one that will ultimately be able to access more capital. If I am an LP and I am looking at both ways that I can invest, of course I am going to go with the easier, frictionless, less risky way without all the pain points and processes. I am going to the secure and much more professional process that I am going through with that GP rather than a PDF document emailed to me that says I owe $50,000, and hopefully it is going to the right place.
As the private capital market continues to evolve, innovative software solutions are driving a technological revolution. By addressing the pain points of both GPs and LPs, from security concerns to operational inefficiencies, these platforms are not just solving today's problems — they are anticipating tomorrow's needs. For emerging managers looking to make their mark in a competitive field, advanced software tools offer more than just functionality; they provide a competitive edge. In a world where investor experience can significantly impact a fund's success, solutions like Verivend are demonstrating that the future of private capital management hinges on both strategic deal-making and seamless execution.
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Sincere appreciation to our contributor Rodney Reisdorf, Co-Founder & CEO of Verivend; written along with Shea Tate-Di Donna and Kaego Ogbechie Rust, authors of The Venture Fund Blueprint.
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