Until recently, GPs and asset managers looking to raise capital for their funds have been limited to traditional methods such as attending conferences, going on roadshows, hiring third party marketing firms, and engaging with placement agents to help attract investors on their behalf. Given the rise of the fintech industry, online investment platforms such as DarcMatter have begun providing asset managers a new way streamline the capital raising process, bringing what used to be an offline process, online.
For many asset managers, being listed on these online investment platforms is indiscernible from being on an online database. At first glance there might seem to be little to no difference. After all, asset managers looking to raise capital can share fund information in both places, and investors visit both when looking for investment opportunities. However, upon closer inspection, there are critical differences between online investment platforms and databases that are worth highlighting for asset managers and GPs.
1. Only Investors Are Registered on Online Investment Platforms
Investors registered on online investment platforms such as DarcMatter have been pre-vetted using built-in controls. These investors and LPs have been vetted to make sure that they are accredited investors to maintain compliance, and many are qualified purchasers. These investors have voluntarily signed up for DarcMatter because they have one specific goal in mind – to seek alternative investment opportunities.
On the other hand, there is a lot more noise that exist on databases. Besides investors, it is common to see researchers, students and salespeople flooding databases in search of new prospects or research information.
2. Online Investment Platforms Feature More Functionalities for Both GPs and LPs
Databases typically contain the following information for investors: background information about the fund, performance metrics over the past few years, minimum investment amounts, lock up periods, and the key team members and their contact information. And some databases even contain information on investors/LPs.
All this information is great, but it only starts to scratch the surface when it comes to interactions that need to happen between GPs and LPs during a capital raising/investing process. Online investment platforms contain the same information as databases, but have built-in features to specifically streamline the aforementioned processes. For instance, on online investment platforms such as DarcMatter, asset managers and GPs looking to raise capital can upload additional materials such as a tear sheet, private offering memorandum, subscription document, limited partner agreement, due diligence documents and more. Taking one step further, GPs and asset managers also have full control over what documents they would like to share with certain LPs, allowing them to share any documents with a single click of a button.
Another added functionality on online investment platforms is that communication channels exist to allow GPs and asset managers to directly connect and message with LPs. Both sides have the option to communicate using a centralized dashboard without having to search for lost email threads.
These additional interactions between LPs and investors are steps that allow asset managers to further move along the capital raising process. So while investors can use databases to source investment opportunities, the number of actions they can take are severely limited to reviewing top-line fund information and contact details. On the other hand, online investment platforms have additional features and functionalities designed to streamline the capital raising process, all in a compliant manner.
3. Trust and Reliability Score Better on Online Investment Platforms
Online investment platforms such as DarcMatter curate the funds that are featured on the platform and perform due diligence on behalf of investors. Therefore, LPs who are actively looking to allocate towards alternative investment opportunities find comfort in the fact that they are only reviewing funds that are open to new investments. In addition, because the funds have been pre-vetted and have already gone through a due diligence process, investors are assured that these funds have been verified and that there will be access to appropriate information in order to make an investment decision.
The level of curation varies between databases as some perform fact checks, while others have more of an open door policy, allowing anyone to post up a fund. However, the majority of databases do not perform due diligence. Overall, LPs and investors who are using online platforms to allocate will not only find themselves saving time, but also not having to go through the brain damage of verifying funds.
Databases can be a great supplementary tool for LPs and investors to use when comparing various funds and gathering information to gain insights into an industry. However, when It comes to capital formation and/or investing, there are additional functionalities that online investment platforms provide because these platforms are created specifically to help both GPs and LPs save time and costs. Online investment platforms such as DarcMatter not only help GPs and asset managers generate new investor leads, but also enable them to take one step further by having a centralized tool to gain exposure to new investors, communicate, and manage these prospective investors.
DarcMatter (“DM”) is a global fintech platform that streamlines the capital raising process for asset managers and provides investors with transparent and direct access to funds in the asset management industry.
DM’s mission is to enhance capital flow through fintech to create transparency and efficiency by providing direct access to funds in the Asset Management industry for Accredited Investors, Advisors, and Asset Managers.