How a digital fund subscription process improves GP-LP relationships

February 8, 2023

A challenging subscription process can harm a general partner’s relationship with their limited partners and push LPs toward more tech-savvy asset managers. The solution? FundFormer: A user-friendly digital subscription solution available with Insight.

Challenges of the status quo

For years, GPs and their investors have settled for the traditional, manual subscription process. Despite the assistance of third-party fund administrators and funds counsel — typically one of a few BigLaw firms — LPs trudge through the paperwork.

Completing the subscription book is cumbersome and time-consuming, no matter the sophistication of the institutional or high-net-worth investors.

Incomplete Forms

By relying heavily on PDF sub-books, LPs are confronted with a mountain of paperwork to complete. Ultimately, only certain forms are relevant to each LP, and, in some cases, LPs are unfamiliar with how to best answer particular questions. The result is often missing, incomplete, or inaccurate responses.

Lengthy communications

After LPs return their sub-books, the fund administrator and funds counsel often must go back to the LPs to offer guidance or request revisions. On a practical level, this is weeks or months of back-and-forth emails.

Manual signatures

In many cases, LPs have to sign their paperwork manually, which requires printing, signing, and scanning the final documents. For distributed teams, this challenge can delay the completion of forms and capital deployment.

Slow completion times

Multiply this situation by several questions across dozens or hundreds of LPs, and completing the subscription process becomes a significant burden for the fund administrator and counsel. In the end, typical sub-books are often longer than 100 pages and can take months to finalize.

How FundFormer improves the investor subscription process with a digital workflow.

Benefits of a digital fund subscription process

Now that digital subscription platforms are available, parties don’t have to put themselves through a challenging fundraising process. FundFormer offers a smoother, simpler process for all involved.

User-friendly forms

An electronic subscription process offers limited partners a user-friendly interface. Instead of receiving a 100+ page PDF, investors receive login information to a digital platform they can access from anywhere. When they sign in, they’ll see a customized set of forms they can click through.

Conditional logic

With an electronic sub-book, LPs view and answer questions through an online platform. Traditional PDF sub-books contain documents irrelevant to various LPs, such as W-8 or W-9s, individual or entity self-certification, and U.S. or non-U.S. questionnaires. To solve this issue, digital forms use conditional logic to automatically assign documents based on the type of entity of the LP, drastically simplifying the process.

Additionally, how LPs answer specific threshold questions, such as tax-exempt status or ERISA status, determines the next relevant questions they must complete, saving them considerable time.

Fewer mistakes

A digital solution can flag incomplete forms and improperly answered questions, ensuring fund administrators and counsel receive fewer incomplete forms. The FundFormer platform won’t let LPs sign and submit incomplete forms. When the funds counsel still needs additional information after receiving complete sub-books, the firm can communicate with LPs directly through the platform instead of sending emails.

eSignatures

When LPs have completed their subscription process, they can use an electronic signature integration within the platform. LPs can e-sign their documents on any device within minutes instead of using a printer and scanner.

Faster completion times

Digitalizing subscription documents, preloading data from a universal investor profile (e.g., wire instructions, contact info, accredited investor status), and creating a more intuitive experience for LPs can drastically reduce onboarding times.

Top 10 Terms in Subscription Documents

Before and after digitalization

During a traditional subscription process, GPs are often unaware of each investor’s progress through the workflow. There’s limited visibility into when GPs will be able to close the fund and deploy capital, and what information GPs do receive is through a manual process owned by their outside counsel. Overall, the traditional process slows down fund deployment while generating excessive outside counsel fees.

For GPs, the digital platform offers real-time visibility into the fundraising process (e.g. alerts when investors change their requested commitment, complete forms, and sign documents). It provides a central location for the LPs, GPs, and third parties to collaborate on reviewing and clearing investors for closing. Most importantly, it empowers GPs to see how their fundraise is progressing and when they’ll have access to capital.

For LPs, completing the subscription process on a digital platform can be a far more pleasant and secure experience than navigating PDF forms. Through conditional logic, FundFormer gives LPs fewer forms and questions to navigate overall, so they aren’t burdened by reviewing forms they don’t need. LPs also are able to upload documents to a secure platform instead of emailing sensitive documents, such as copies of passports and bank statements.

The traditional subscription process is also particularly frustrating for LPs re-upping in follow-on funds with an asset manager they’ve worked with before. It’s a repetitive process they have to do again and again with each new fund.

A digital platform gives LPs the ability to create investor profiles. This way, returning LPs can more easily complete the subscription process based on the information they provided before instead of starting from scratch. This saves everyone time and reduces the time to close.

Better GP-LP relationships with FundFormer

FundFormer (available with Insight) is a digital fund subscription solution that improves the GP-LP relationship by streamlining the fundraising process, simplifying investor onboarding, and reducing costs.

The solution brings together all the parties involved, including the asset manager, fund administrator, funds counsel, and investors. It provides a secure place to collaborate and eliminates inefficiencies that frustrate LPs and slow down GPs.

The digital process offers all parties a smoother experience that’s more likely to support long-lasting relationships between asset managers and investors.

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