Lead Edge Capital is a growth equity investment fund based in New York City and Santa Barbara, making software, internet, consumer, and tech-enabled services investments globally. Lead Edge leverages an investor base of over 700 strategic individuals to help companies, connecting customers, partners, talent, and advisors to accelerate success. Lead Edge invests $25 million to $300 million across private and public technology companies. With over 700 strategic investors and over $5bn under management, Lead Edge is an active investor and likes to get involved with business development, advisory and recruiting with most of their portfolio companies.
Lead Edge has strong relationships with traditional institutional investors; however, majority of their investors are successful current and former Fortune 500 C-level executives and entrepreneurs. Lead Edge raised their 6th Fund in 2021and at the time the team knew they had to get away from the minutiae of sub doc execution in order to build enduring relationships with their LPs.
We're joined in this webinar by Emila Damjanovic, Partner of Investor Relations, Serra Sangar-Osei, VP of Investor Relations, and Elan Gefen, one of Passthrough's product managers.
Watch the full video below and read on for a summary recap.
Emila, can you please introduce yourself and tell us about your background with Lead Edge?
ED: I have actually been a part of Lead Edge since inception, I was part of the founding team: Mitchell Green, our founder and I overlapped at a Julian Robertson/Tiger Partners seated hedge fund at 101 Park Avenue. Unfortunately, Julian Robertson has since passed away, but was quite active in that space. Mitchell spun out to start Lead Edge with Nimay Mehta, who was also part of the founding team, and then we were joined by Brian Neider a few months after we kicked off our initial Lead Edge organization. I've seen the growth of the team and the organization. It's been my honor to support the team and the investor relations function, and the overall thinking of how to scale a business when it starts with a vision with a quite young team that has grown up in this space since 2009. It's been a really awesome ride for me.
I'm based out of San Francisco. Our primary focus is deploying capital with checks ranging between $25 million to $300 million in software, internet, and tech enabled services. A big differentiating factor for Lead Edge is our investor base. As you had mentioned, we continue to cultivate relationships with 700+ investors. We have been super lucky in that we are backed by traditional institutional investors that really resonate with our strategy, but a really big bulk of our business relies on the ultra-high net worth individuals, the Fortune 500 current and former C-level executives, and entrepreneurs that we've had the pleasure of collaborating with over the last decade plus. And so, that's a big differentiating factor for us.
What do you think has been the biggest factor of your fundraising success so far?
ED: That is a great question, especially in this market. Timing sometimes proves to be really a big point that drives fundraises, and I think for Lead Edge, our team was thoughtful and really intentional about coming back into the market in 2021 when we were raising Fund VI. And it's really a reflection of how the team works as a whole. For Lead Edge in particular, for example, Mitchell Green, the founder, Brian Neider, and Nimay Mehta, who are the other two partners that are running the firm, they like to spend time with our investors. They enjoy getting to know our individual investors and institutional investors because we leverage that network at every step of the way as we're deploying capital. To have the founding partner and other managing partners be a big part of how we build these relationships is unique.
Mitchell Green's vision when he was launching Lead Edge was to build a network of people that would enjoy and appreciate spending time with each other. We have intentionally — since the beginning of the organization — spent time cultivating these relationships. We obviously do host a big annual meeting, but we also host regional dinners. We host quarterly calls. Our team is incredibly accessible. As we were wrapping up the launch of Fund IV, we realized that we needed to add one more person to the team to really help continue to cultivate those relationships and be as responsive as possible because the inbound from investors could be quite large when you've got such a large investor base.
Serra joined the team mid-2018 to support that, and she's been an incredible addition to the team because we want to be that responsive and offer that white-glove service to our investors as they reach out with questions.
Serra, can you please introduce yourself and tell us about your background with Lead Edge?
SS-O: Sure. I joined Lead Edge in 2018 right after Emila closed up our 2018 vintage fund, and I started my career out of college at Tiger Partners as well, Julian Robertson's fund. I worked there for about five years, and then I transitioned to, no one would guess, but Afghanistan, I ended up in for about three years working as a contractor for the U.S. government on a U.S. base in Afghanistan. It taught me a lot from an IR perspective because I was doing client relations and dealing with the U.S. government and contractors and the workers, everyone. You learn to be very quick on your feet, which is amazing. And then in 2018, Emila called and said, "Okay, are you ready to go back?" I had two kids by then and I said, "Sure. Yes, I’ll join."
My role at Lead Edge is to make sure we are answering any of our investors' questions in a timely manner: within 24 hours. We aim to be very accessible to our investors. That's our main goal, and Emila made sure that it's in my blood as well. It's been the two of us from the get-go, but as we got bigger, we closed Fund VI, as she said, in 2022, which kept us very busy, but we really strive to make the process and make investing easier and to keep up to date easier for our investors, which is very important to us.
You've somewhat answered this already, but is there anything else that you attribute to being a big factor in your fundraising success?
SS-O: Emila said everything that needs to be said there, but our team really focuses on delivering the investment thesis and bridge Mitchell Green and the partners founded, and we just like to focus on incredible client services.
Elan, can you please give us a quick introduction and your background with Passthrough?
EG: Certainly. I probably have the least impressive background of the two ladies on the call here, but I started actually working at a startup that grew to be one of the larger, or the largest private fund administrators in the venture ecosystem, so I got a lot of exposure to the private funds markets. I then actually moved into a sales role at Passthrough where I helped lead a lot of our sales initiatives, and currently, I'm sitting as a product manager on the team helping lead a lot of our initiatives around Passthrough's core investor onboarding product. I have an interesting perspective coming from the sales side and then transitioning to the product side and working pretty closely with our customers.
What do you think the most valuable thing is that Passthrough offers our customers?
EG: I think it's time back. One of the key things that makes a large firm like Emila and Serra’s successful is having a marquee client service and being able to be responsive and build relationships with your LPs. One of the things that Passthrough really does is give time back to folks on the IR side, it gives time back to general partners so they can actually, instead of focusing on trying to help people figure out subscription documents, they can focus on creating better client experiences for their LPs, and helping make sure that if there is a really important topic they need to handle, they can address it whenever they need to.
The same thing actually on the flip side for an investor. An investor, the last thing they want to do is spend hours filling out pieces of paperwork. They want to be able to subscribe to a fund as quickly as possible and build a relationship on the right footing. And so, Passthrough really gives fund managers and IR teams a lot of time back, which is very valuable. Your time is important and it's expensive so, if you can do that, it pays dividends over the long run.
Emila, you've had a relatively long career in investor relations, so you've seen how the industry has evolved and particularly how the IR role has evolved. Can you speak a little bit more to that evolution and what do you think is driving that change?
ED: I definitely think that the expectation from the LP/allocator side coming in as an investor into the private equity or the public equity space has shifted over the last two decades. Historically, people thought about investors differently. An investor came in, they understood your strategy, they knew the PM or the founder of the firm, they wrote a check and the founders or the team didn't really necessarily spend much time with those investors understanding their questions. You got a diligence request, you completed it, you sent it back. It wasn't as interactive or as deeply integrated.
The relationship has evolved between the GPs and the investors. To really credit Mitchell at the launch of Lead Edge, he wanted that to be a big part of how we think about building out the firm. Ensuring that the investors are responded to in a timely manner and making sure that the relationship continues to build, is reflected in who our investors were in Fund I and who our investors are right now, and what our re-up rate looks like at Lead Edge. To have cultivated those relationships over such a long time is a big testament to how this was thought about very early on as we were launching the firm.
There's a bigger demand from the LP side for communication, transparency, and access, which is a reflection of the macro of the market across the private and the public space, and also just an evolution of what the LPs want this to look like going forward. For Lead Edge, we haven't had to make many changes because that's kind of been our system and our thesis since the beginning. We're definitely thinking about what this looks like for Lead Edge going forward, and how we maintain this incredible strong bond with our investors.
Historically, the LP-GP relationship was pretty light touch. It was focused on being a well performing manager and the investor mostly stayed out of what was going on on a daily or monthly or quarterly basis, and the touch points looked a little bit different. There was a set cadence in how the communication was provided to LPs and over the last five plus years we've seen quite a shift in that and I think the industry is responding to it.
So if we look at some of the releases from our peers, there is more of a demand from the LPs for communication transparency and access to data. We're seeing it from our investors more and more, but we haven't really had to make that many changes because we have always been incredibly accessible, super communicative and transparent. That has always been in the Lead Edge DNA from the beginning because that was one of the big pillars for Mitchell Green as he was launching the firm and invited us to come and build it with him.
What do you think is the main force behind driving that change? Where do you think that increased demand has come from?
ED: Without going too much into the macro space, I do think that over the last couple of years the private equity space has shifted. The macro outlook on allocation investing has changed quite a bit. We're hearing that the fundraising cycles are much longer so the investors are asking for additional information. The diligence looks a little bit different, so I think that's a big part. It is a macro playing into what goes on in that private space quite a bit.
Before using Passthrough, can you describe your experience closing funds and what that level of communication was, what that level of manual work was?
SS-O: Before Passthrough, there was a lot of back and forth with the investors: sending the offering documents, then once they commit to their check size helping them prepare because we really like to make it as easy as possible for our investors to submit their documents with us. We would help them fill out their documents and if it's an existing investor, we always made it a shorter version of the subscription documents. The process was manually sending hundreds of subscription documents and receiving them, going through them one by one, extracting wire details, address, EIN, contact details if there are any updates. And all this manual work is prone to mistakes. It was a lot of data extracting on our side and Passthrough really helped us save time with that.
How were you thinking about scalability at that stage? Because that manual process is obviously difficult to scale when your investor numbers are ramping up. If it's a manual process, the logical next step is to ramp up your team numbers, so how were you thinking about scalability before you decided to digitize?
It's either you think about how you implement technology or you scale your team, but when you're in the early stages of the fundraise, there really isn't an opportunity to scale your team because as you can imagine, bringing someone on during such an intense time could slow you down. It could be very successful, but it could also just be time-consuming because you're kind of training someone and you're trying to build a fund and bring everyone on.
We knew what was happening with Fund V from a deployment perspective, and the two of us really wanted to be proactive about setting us up for success. Of course, IR is incredibly important throughout the life cycle of the fund, but when you're onboarding investors and you're building new relationships is critical because the first impression that you leave could have a long-term impact on that relationship.
We didn't know what was available, but we did think that there had to be a solution that could work for Lead Edge given the number of investors and relationships that we were building. We didn't know what to expect and we reached out to our fund administrator and some of our platform providers and learned about Passthrough from one of our existing investment team members.
Serra and I reached out and were lucky enough to connect with Ben and Tim at the time. They talked about what Passthrough does and why he thought it would be a great solution for Lead Edge. There wasn't that traditional sales pitch where you ask a question and the response is catered to what you want to hear, and then you sign up for the product and you're quite disappointed a month or two into it because it's not delivering.
Serra and I huddled up to understand what might be our best path to success, and we chose Passthrough because we loved the interaction we had and really thought about that relationship kind of the same way that we think about how we build our relationships with our investors. And now, once we decided who we wanted to go with, we had to pitch this to the founder and the other two managing partners.
Eventually it came down to, "Look, you and Serra have done this for a long time. We trust you and if this is what you think is going to make this really easy for you, please go with it." We kicked off our fundraise for Fund VI in October of 2021, and Passthrough helped us process north of 800 subscription documents in less than a month's time because our fundraises, historically, are quite short.
And to be able to succeed at that and as Elan had said, give ourselves and our investors time back was really incredible. And some of our investors are very tech savvy, some of our investors are not that excited. Some of our investors still want to send me a fax and I go, "I don't quite know where to send that," but to have the investor base be so receptive to something new that we launched was incredible. And that's a testament to how Passthrough was built, how easy that platform is to navigate, how incredible helpful both Ben and Tim were at the launch. We have since used Passthrough for another one of our strategies where historically, we had access to a lot of co-investment vehicles. We're hoping that becomes something we can offer to our investors this year and going into next year, and I honestly can't think of what this would look like without Passthrough.
SS-O: Yeah, I would now want to go back to what we had, for sure. I don't want to go back to an Excel spreadsheet and manually deciphering someone's handwriting.
Elan, I'd love to turn this around to you and ask, does this resonate? Are these common pain points that you hear from customers both when you're on the sales side of Passthrough, and now, you're on the product side?
EG: Yeah, they definitely are. We hear a lot of reasons why people are looking to adopt solutions. Fundraising is just getting more difficult, so you want to be impressive in front of your investors, you want to provide them with a better experience. We hear a lot about the pain points of extracting data from subscription agreements. We hear a lot about the importance of building relationships with your LPs and starting off on the right foot.
First, nobody really has a really good real-time picture of where they are within their fundraise. As fundraising timelines get drawn out, you have more closes or you raise more capital — whether it's through co-invest vehicles or you're just constantly raising more funds — having access to a solution where you can just log in and see all of your information updated in real time, and you know exactly where you stand, it becomes really powerful, so people want that.
Second, the ability to pull and push data. You'd be surprised at the amount of time fund managers or IR teams spend trying to pull information out of documents, and then having to take that information and upload it into their internal systems. Wire details, bank instructions, contact details: there's just so much information that's collected as part of the subscription process, but it's stuck in these manual documents and there's no great way to get this out, so you spend hours, days, even weeks of time pulling information into Excel spreadsheets and you're kind of praying that you didn't fat finger anything and that the information is right. A key pain point is “how do I get my data out and how do I get my data out in a very clean and accurate format?” And then, “how do I push it to the people or the systems that it needs to go?”
Your law firm probably needs the data. Your fund admins need some of the data. You probably have a CRM that you need to update information in or you have an investor portal that you need to post information to. Having all this information at your fingertips with a click of a button again is incredibly powerful.
Third, investor profiles or data reusability. I think one of the changes that we're starting to see within the funds that we work with is people are not just looking at adopting a solution for just one fund, they're starting to look at adopting a solution for all their future funds.
What typically happens, and I think you've run into this, Emila, is you have 700+ strategic relationships and many of those people are repeat investors in your funds, you're asking them the same questions over and over again every single time they come to invest. If you had a solution where once your investors go through it once, the next time they come through it's just click, click, click, review and make sure all the information's right and invest. That's really, really powerful and just creates a much better investor experience than, oh, you invested with us once now go fill out another 50 to 100 page long subscription document.
ED: Historically, we would chase people and go, "You already indicated that you're interested in investing, can we get your subscription document?" And it was daunting to have to print because not everybody has access to a full service Adobe program, and so you're printing what seems like an endless amount of documents and thousands of pages. People would look at it and go, "Oh, overwhelming, I don't want to deal with it right now," To be able to send the link to where the document is uploaded and it applies logic to the document to just ask for the information Lead Edge needs from you based on your investor type and if you’ve invested with us before is amazing.
The fastest time we onboarded an investor when we were fundraising for Fund VI was about three minutes. It was some crazy timeline. In three minutes, you can't even print 50 pages and that's how long these subscription documents are with all the disclosures. To be able to have someone complete that in three minutes is just incredible. And then, the feedback we got was amazing. Even the people that didn't want to onboard initially and were like, "Oh, I don't want my information on this platform," were like, "This is incredible. I have a friend who's launching a fund. He needs to learn about this." And we're like, great.
How does it fit in with the rest of your investor relations strategy, which you've both spoken to in some depth already, and what did your investors think of it? And we've had a question from the audience: have you seen any LP adoption themes between institutional versus high net worth LPs? Maybe we can break it down into, what did they think of it overall and what have you seen between those two groups?
SS-O: Individuals actually love the ease of clicking through the subscription document. Once you select ‘individual’, it will surface the correct questions, which is very helpful. If you're an entity, it takes you directly to that section. It's the ease of access and how fast they were able to complete it was absolutely amazing.
On our end, any exhibit that we reviewed and needed to be revisited we could just select A, B, C, and send a message: “John, can you please look through exhibit A section two and review this?” It would send an email directly from the portal just for that section, we didn't have to go through and securely send the whole PDF to John in an email. Instead, we just did it on the portal and they don't need to log in anywhere, just by the link is accessible to them. So it was absolutely a game changer for the investors and us. It saved a lot of time for both sides.
ED: Some institutional investors are obviously a little bit more receptive to new technology, while some have a very traditional process in place and that is okay. We did see that when we offered Passthrough, more often than not, the investors took us up on that because whatever information they wanted was available to them to download on Passthrough anyway.
When you're emailing offering documents, and for anyone who's on this webinar and has experience fundraising, not everyone that you send your offering documents to is actually going to end up subscribing, but to be able to track that within Passthrough across your individual and your institutional investors and know who has looked at the subscription document or the offering documents, which of their team contacts actually interacted with it. You can ask if there are other people on their team that you should add that should have access to it?
All of that is available on this one platform versus referencing back to an Excel file, your Outlook, or your G-Suite depending on what you use for communication, interacting and calling the team and going, "Oh, did you get this extremely large file? Did that make it to you?" Passthrough really takes away that ambiguity around whether it was delivered. Did somebody actually access it? And you can push people through that process seamlessly. I would love to say that everyone we send the offering documents to would subscribe at Lead Edge, but that's just not the reality. To be able to close someone out and say, "We chatted on the phone. This person was not interested at this time. Let's circle back during the next fundraise," is really incredible. We found a lot of value in that space as well.
Elan, how would you describe Passthrough to somebody else in Emila and Sarah's position before they implemented Passthrough?
EG: I would describe Passthrough as TurboTax for investing in funds. As simple as that. What we are doing is we are taking a process that I think everyone can agree, nobody likes. Everyone hates subscription documents, it's the bane of most people's existence. We’re turning that into something that is surprisingly pleasant.
Sometimes we get feedback, either from LPs or from our GPs and clients we work with. One of my favorite early Passthrough stories is when somebody wrote back and said, "This was oddly fun." And I think if you looked at Passthrough, or you looked at the industry five years or 10 years ago, nobody in their right mind would ever say that investing in a fund is oddly fun. I think that's kind of the core of what we're doing and hopefully we're making this process a little bit better for everyone.
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