fundcraft, why we invested
A team, business model, technology platform and market opportunity that tick all the boxes
fundcraft delivers pioneering digital infrastructure for asset managers. For us, fundcraft embodies the next wave of fintech, which is about the application of innovative business models and technology to solve bigger and more complex market needs, working with, not against, incumbents.
We see fundcraft as a business that will be dramatically disruptive, but in a way that dramatically improves the costs, agility, and scalability of asset servicing, bringing massive benefits to fund managers and their clients and accelerating the democratization of alternative assets.
We are delighted to announce that we are investing in, and working together with, the fundcraft team and welcome them to our portfolio.
A big market need
Most asset managers outsource all or part of the administration of their funds to third-party asset servicing companies, who handle accounting, reporting, compliance, and other functions.
This asset servicing market has become a giant industry. Across all asset classes, the asset servicing market is worth around $200bn — just the alternative asset market is worth $50bn.
However, it’s an industry riddled with legacy systems and analog workflows. Most asset servicers run their businesses on emails and spreadsheets, with correspondingly low levels of straight-through processing and self-servicing. EY, which describes digitization in fund administration as being in its “infancy,” estimates that 50% of middle and back-office costs are personnel-related.
For asset managers, all of this results in a poor customer experience, unscalable communication overhead, high costs (especially when factoring in the oversight needed), low transparency over the workings of their fund(s), and a lack of agility when it comes to launching funds or innovating with fund structures.
Taking a different approach
We were drawn to fundcraft because they have approached the asset management industry’s pain points with a fresh perspective. Their platform addresses the bureaucratic complexities that bog down fund management by providing an operating system that streamlines back-office operations and integrates them with front-office services, giving the high-level of self-service needed with much better economics.
Technology for a single source of truth
But fundcraft isn’t another point solution offering better pricing and user experience. Its scope and ambition go much further.
First, it brings together six disparate workflows and datasets. Specifically, fundcraft consolidates compliance, Corporate Secretary, transfer agency, portfolio management, accounting and reporting into one centralized platform, a single source of truth.
Second, the platform is open to an ecosystem of actors. It’s open to the asset manager, of course, but the asset manager can also invite onto the platform its lawyers, accountants, depository bank, tax advisors, fund administrators and any other party it needs to interact with in managing its funds. All parties then work from same consolidated dataset, with the right permissions, and with full visibility of each other’s actions and workflows. What is more, the platform acts as the nexus to integrate more specialized software applications — allowing asset managers to leverage preferred tools and ancillary services.
In effect, fundcraft doesn’t just act as a digital platform for asset servicing — a vertical SaaS for asset administrators, so to speak — but orchestrates the whole ecosystem for fund management.
Network effects for distribution
In the internet era, technology businesses are as much about capturing the benefits of networks (virality and network effects) to grow faster as they are about technology itself. In enterprise software this is harder to achieve than in consumer platforms, but as fundcraft shows, it is possible to introduce network effects into B2B business models.
By creating a single ledger around accounting, where multiple parties in the ecosystem can login to the same system as asset managers, there is an incentive for referrals within their overlapping networks of collaborators. And within the marketplace that surrounds fundcraft, there is the natural two-sided pull of more marketplace vendors attracting more asset managers, and vice versa.
A top team
One common feature of successful ventures is the people pursuing the opportunity. fundcraft’s founder, Julien De Mayer, nicknamed ‘the machine’ since his time at Rocket Internet, provides both the drive and the vision for the business which, as a former lawyer, he knows can profoundly re-imagine asset servicing. And Julien has surrounded himself with a fantastic team, led by CTO Victor Martin, a fintech industry veteran of 12 years and creator of the architecture underpinning the platform, and CPO Olga Porro, whose team has built out a full end-to-end platform in just over two years.
Proven solution in the most complex market
The launch of fundcraft in the highly regulated Luxembourg market demonstrates their deep understanding of the complexities involved and positions them well for expansion into different jurisdictions. Luxembourg, with its stringent regulatory environment, serves as an ideal launchpad for fundcraft’s global operations.
In addition, while fundcraft is focused on venture capital, private equity, and fund of funds for now, the team is already looking to expand into other assets classes, which the extensibility and configurability of the system makes straightforward.
Ticking all the boxes
Aperture isn’t a venture capital firm. We provide go-to-market services to fast-growing B2B fintech companies, and we invest in these companies to improve incentives and alignment. These are long-term partnerships, where we become deeply embedded into the fabric of our clients. For us, there is more at stake than just investment capital.
When we got to know the team at fundcraft, we satisfied ourselves about three crucial things:
- This is a team with a culture compatible to ours; a team focused on winning and redefining an industry, but through excellence, rather than aggression. Massively ambitious, but never cutthroat.
- We believe fundcraft has the right model to transform asset servicing. We have also seen for ourselves the inefficiency in this industry. Some of us have even worked for tech companies trying to solve the problem, but by taking too much of an incrementalist approach. And we’re convinced something radically different is needed: a model which captures both supply-side economies of scale, by digitizing fund administration end-to-end, and also demand-side economies of scale by orchestrating the fund administration value chain.
- We believe we can make a difference. Given the expertise of our team in B2B fintech, our value proposition works best where a company has a complex product selling into organizations with complex buying processes. We specialize in building trusted brands, in shaping and simplifying product messaging, and in activating new clients, working hand-in-hand with sales teams all the way through the buying process from lead creation to closing. This is what we’ll do at fundcraft, and we’re sure we can accelerate its growth.
For us, then, fundcraft ticks all the boxes. And we can’t wait to help them realize their mission to revolutionize the fund industry.
