Case study: SOSV

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One of the things we love to see here at AltaReturn is the efficiencies our clients gain in their back office once up and running on the AltaReturn platform.  Case in point: venture capital firm SOSV.  (click here to download a PDF of this case study)

SITUATION

SOSV is a multi-stage venture capital firm that invests through their global accelerator programs with a focus on hardware/connected devices, life sciences, cross-border internet and food innovation.  The firm provides support to talented entrepreneurs with more than just capital, but an unparalleled network of engineers, designers, scientists and accountants to foster growth.

Founded in 2008 by industry veteran Sean O’Sullivan, the firm manages over $525 mil. in assets from offices in Shanghai, Shenzhen, London, Cork, New York, San Francisco, and Princeton, New Jersey.

In 2014, the firm began fundraising for SOSV III, with the goal of expanding the firm’s client base to include outside capital for the first time.  As interest with institutional investors began to develop, the firm soon realized that their operational makeup – particularly in LP reporting – was going to have to improve dramatically.

Like many GPs, SOSV used a combination of MS Excel along with a small business accounting package to handle fund accounting and reporting.  As SOSV continued to grow, they found their use of spreadsheets wasn’t able to keep up. As the spreadsheets increased in size and complexity, so did the errors they ended up producing.  At the same time, they realized that using Excel for LP reporting was not going to be sufficient with institutional investors now coming on board.

Brian Murphy, Financial Controller with SOSV, recalls: “We knew that more sophisticated LPs were going to require more sophisticated reporting. Moving away from an Excel-based reporting structure was going to be required.”

SOLUTION

With the final close of SOSV Fund III nearing the end of 2015, the firm began to explore other options for their back office systems.  With an eye on cost effectiveness, SOSV initially looked to a large ERP database provider to build a customized solution.  During the process, however, it became clear that the undertaking was going to be neither cost effective nor give them the functionality they were going to need. SOSV then embarked on a comprehensive search for a third-party provider that had specific operational experience with venture capital firms.  An important part of SOSV’s due diligence process involved speaking with the actual clients of the various platforms under consideration.  SOSV ‘s reference checks in their evaluation of AltaReturn revealed a solution that was highly regarded by the firm’s VC clients, giving SOSV confidence that AltaReturn was going to be the right decision for them.

As an accelerator fund, SOSV had a number of requirements that required special consideration during implementation. Most notably is the fact that SOSV invests in over 150 companies per year, with various transaction types including equity, convertible notes and SAFE’s.  Terms for each transaction – including anti-dilution, liquidation preferences, warrants, etc. – needed to be captured and reported on.  AltaReturn’s CRM solution, with its highly customizable ability, provided SOSV the functionality to address these needs.  Another consideration was how SOSV was structured around their six accelerator programs, in addition to the underlying portfolio companies.  This structure introduced a more complex level of reporting which AltaReturn was able to configure during implementation.  “AltaReturn invested the end resources that were needed to make sure the implementation went right,” added Murphy.

BENEFITS

SOSV is committed to providing their investors with the transparency they need and want.  This often includes commentary about the markets SOSV is investing in along with portfolio company updates in addition to the quantitative data that comes with having invested in over 750 companies.  Leveraging AltaReturn’s CRM and Investor Portal solution has allowed SOSV to achieve the information scale the needed.

“It was very important to us that we provide our LPs with the highest level of professional reports possible.  Given AltaReturn’s long history in helping GPs with their reporting needs, it was clear they know what LPs are looking for.  That experience has been a huge benefit to us in making sure our investors have the information they need,” says Murphy.