When to engage a fund administrator

Published date: 28 August 2023 | 5-Min Read

In the intricate world of venture capital, timing is everything. From identifying the next big startup to ensuring liquidity for investments, every decision is a delicate balance of risk and reward.

One such critical decision is determining when to onboard a fund administrator. Coupled with this is the strategic management of capital calls.

Let’s delve deeper into these aspects.

The best time to engage a fund administrator

1. Pre-fundraising period:

By setting up your fund administration early, you prevent the risk of paying for overlapping services. It’s essential to consider all your key provider options simultaneously, as one decision often informs another.

2. Avoiding redundancies:

The ideal time to start collaborating with a fund administrator is before you even begin raising your fund.

Engaging a fund administrator 6 to 12 months prior to your first close is recommended.

This proactive approach ensures that you have the necessary infrastructure in place to manage the complexities of fund administration from day one.

3. Strengthening LP relationships:

Engaging a fund administrator early on signals to Limited Partners (LPs) that you are committed to operational excellence. It demonstrates foresight, preparation, and a commitment to transparency – all of which are crucial for building and maintaining trust with LPs.

The role of capital calls

1. Streamlining the first round:

Having a fund administrator in place ensures a smoother experience when raising your initial round. They can help you navigate the complexities of the first capital call, ensuring that funds are available when needed.

2. Setting a regular cadence:

A fund administrator can assist in establishing a regular rhythm for capital calls. This predictability helps LPs plan for efficient capital deployment, ensuring that they have the necessary liquidity to meet their commitments.

3. Leveraging lines of credit:

Some fund administrators, like ACE Alternatives, collaborate with banks to offer a capital call line of credit. This facility allows funds to start making investments immediately, without waiting for the capital call process to complete.

The synergy of fund administration and capital calls

When managed effectively, the relationship between fund administration and capital calls can be a powerful tool for venture capital firms. Here’s why:

1. Real-time data insights:

A robust fund administration service provides real-time data insights about your fund. This data is invaluable when making capital calls, ensuring that you have an accurate picture of your fund’s financial health.

2. Reinforcing the narrative:

Venture capitalists are, at their core, storytellers. When LPs commit to a fund, they’re buying into a vision of the future. A fund administrator helps craft this narrative by providing accurate, timely data. This narrative is further reinforced with every capital call, reminding LPs of the fund’s strategy, vision, and progress.

3. Demonstrating operational competency:

In the competitive world of venture capital, every edge counts. By efficiently managing fund administration and capital calls, firms can demonstrate a high level of operational competency that institutional LPs expect. This competency can be a differentiating factor, especially for emerging fund managers.

Conclusion

The intertwined decision to engage a fund administrator and the strategic management of capital calls both play a pivotal role in the success of a venture capital fund.

By understanding the nuances of these aspects and leveraging them effectively, venture capital firms can position themselves for success in a competitive market.

About ACE Alternatives

ACE Alternatives (“ACE”) is a leader in managed services in the Alternative Assets sector like venture capital, private equity, fund of funds, real estate, and more. Leveraging a proprietary tech platform and extensive industry experience, ACE offers 360 degree tailored solutions for fund administration, compliance and regulatory, tax and accounting, investor onboarding and ESG needs. The fintech was founded in Berlin in 2021 and has since established itself as one of the fastest growing alternative investment fund service providers in Europe. ACE is currently used by over 45 funds. In 2024, ACE received seven-figure funding from Bob Kneip to expand into new markets. ACE’s vision is to redefine fund management by demystifying complexities and promoting transparency.