This post is part of our Emerging Manager's Guide to Fundraising. Download the full guide for more best practices to launch and scale your fund.
Real estate is the largest asset class in the world. So it follows that large and attractive economic outcomes can occur when you combine the category—such as Airbnb or Zillow—with technology. That’s Wilshire Lane Capital’s thesis, and it’s proving to be a successful one for the LA-based fund that invests in early-stage proptech startups.
The firm also focuses on supporting underrepresented founders: groups of people that for whatever reason—societal and macro-environmental—are underrepresented when it comes to venture capital versus their numbers in society, for example, women. They find that underrepresented founders may have had to work twice as hard to get where they are, and that drive is the “secret sauce” of Wilshire Lane’s successful portfolio.
Adam Demuyakor, Founder and Managing Partner of Wilshire Lane Capital, has an extensive background in venture capital, including time at Andreessen Horowitz and Fifth Wall, after working as a hedge fund investor at The Carlyle Group and in the Real Estate Group at Morgan Stanley in New York City.
He was acutely aware that the investor onboarding process was one of the least enjoyable parts of running a fund—both for himself and for his investors.
“When the LP tells you that, ‘hey, we’ve discussed and would like to inform you that we’re joining your fund’, it’s a moment of joy,” says Adam. “Immediately after that it can quickly turn into a moment of frustration: you send over the docs, they may not acknowledge receipt and you’re forced into following up with, ‘hey, can you sign this? Can you send that?’”
Adam found that the onboarding phase of the process could ultimately impact the relationships with his LPs. “These relationships, they’re so important to us,” says Adam. “People think that GPs don’t have a boss, per se. That’s not true. We just have a bunch of them. And so I don’t want to introduce a sour note because they verbally committed, then three weeks later I’m actively having to follow-up with them over the paperwork. That borderline antagonistic start can mean the honeymoon is over, fast.”
Managing multiple types of investors creates complexities
Raising a fund with multiple family offices and HNWI investors only added to the complexity. “Emerging managers who are raising capital from a lot of family offices and ultra high net worth individuals are likely deal with more questions during the onboarding process,” Adam says. “Raising from institutions typically goes more smoothly because they have full-time, professional teams of people who are highly familiar with subscription docs, so for them it’s easy. Whereas for a HNWl who’s doing it themselves, or a family office who’s maybe doing it for the first time, it can be more painful and it can take away some of the sheen off of the event.”
The root of the problem became crystal clear when his legal counsel at DLA Piper introduced him to Passthrough. “For Fund III, we determined we wanted predominantly institutional capital sources, so we started working with DLA Piper,” says Adam. “Midway through DLA was like, ‘There’s this platform called Passthrough that you can digitize your sub docs in and connect us directly to your LPs.’” Adam was immediately curious. “I didn’t even realize that anyone understood how ‘pen and paper’ this process was. If there’s anything that can improve what I went through last time, I’m willing to try it.”
Better onboarding equals better relationships
Adam found that using Passthrough immediately made the relationships with his investors better. “When investors say they’re onboard and we send them docs through Passthrough, it reduces the stress, it decreases the time [to onboard], and it improves the relationship,” he says. He’s found he’s now able to spend more time having quality conversations with LPs about Wilshire Lane’s strategy and how he’s investing their capital, not about tedious details about documents.
“Passthrough is a meaningful, very thought out, very intuitive platform,” he continues. “This is more than just clearing a low bar and replacing pen and paper. This is a pretty game-changing thing for us.”
A big part of Passthrough’s appeal to Adam and his team was the visibility into the progress of his raise. “We can literally see the money moving through from stage to stage,” he says. “We know exactly what’s in closing, what’s in due diligence, and what’s been signed without having to estimate. That is a very good feeling.” When necessary, Adam could also send timely reminders to his investors directly on the platform.
And his investors loved it. “On the LP side, they found it really straightforward,” he says. “They were impressed. Using Passthrough has materially improved the relationships between WLC and our investors.”
Particularly appealing to Adam is how low maintenance the platform is. “Human nature means you pay attention more to things that are not working,” he says. “Once things are moving smoothly, you don’t really pay attention to them. That’s where Passthrough excels—onboarding just seems to happen. When it comes to this part of my job, I enjoy it a lot more now.”
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