The GP of 2030: AI, Automation, and the Future of Capital Formation

0:09Welcome back to another episode of Venture Unlocked, the podcast that takes you behind the scenes of the business of venture capital. In today's episode, I have the pleasure of speaking with fellow fintech founder, Alex Robinson, CEO and co-founder of Juniper Square. Founded in 2014, Juniper Square helps fund managers and LPs manage private investments with a greater transparency and efficiency. Their platform has become the gold standard for thousands of investment firms, enabling seamless fundraising, investor onboarding, and reporting. During our conversation, we talked about the evolution of the private markets and the transformative role of technology and AI and fund administration.

0:45We also discussed the inefficiencies that inspired the company's founding, the challenges of scaling operations for both institutional and individual investors, and the ongoing push for greater transparency in the private markets. Alex also shared his insights on how AI is set to revolutionize knowledge work in the industry, streamline workflows, and enhance the investor experience. Key takeaways include the critical importance of embracing technology to drive efficiency, the growing impact of AI on fund management, and the need for adaptability as the private markets continue to grow and evolve.

1:18Samir Khadji is the CEO and co-founder of Allocate. Allocate and Venture Unlocked are independent of each other. Any statements or references made by Samir or his guests regarding third-party investments or securities are solely their views and opinions and are not intended as investment advice or an endorsement of such parties or securities by Samir, his guests, or Allocate. Allocate or its clients may maintain relationships with or investment positions in guests, third parties, or securities mentioned in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

1:56Alex, it's great seeing you. Thanks for having me, Samir. Okay, so from somebody that started a private markets company, I love to talk to entrepreneurs that are also tagging some of the, what I consider inefficiencies and the broken nature of how private markets operate and have operated historically. You started the company 12 years ago. Tell us a little bit about what you saw at the time that really motivated you, inspired you to create the company. Yeah, so the founding moment for Juniper Square was my own experience as an LP, making investments into the private markets ecosystem for the first time, into some venture funds, some real estate funds, some direct real estate deals, very modest check.

2:39I'd made a little bit of money for my second startup, but I didn't come from the industry. And so I naively just brought this expectation to the investing experience as an LP that it was going to be similar to what I had been accustomed to in the public markets. There'd be websites, there'd be links, it would be secure, there'd be a workflow I'd go through. I'd move money digitally. I'd sign paperwork electronically. I just expected a digital account creation process. And instead, a FedEx truck came out to my house with a stack of paperwork, two inches thick that had to be notarized. So I had to go find a local notary.

3:16And I saw that pattern a couple of times and I was like, this is crazy. This is 2013. Everything had moved online. I could do everything with my doctor online. I could buy shoes online, trade stocks online, everything but the private markets universe, which was still literally moving paper around in FedEx trucks. And I got passionate about that problem and sort of started tugging on the thread and saying, wow, okay, actually the private markets universe is huge. It's tens of trillions of dollars of capital worldwide that they're not interest trading efficiently on the NYSE or the NASDAQ with incredible transparent and low cost frictionless trading system, what could be created for the world if you had an efficient market underpinning the world of private markets where modern technology, secure infrastructure, dramatically lower the transaction costs?

4:10And what we saw, what motivated us was, wow, if you could take transaction costs out of the system, if you could make it easier for investors who want to put money into private markets to connect with the GPs who are supplying those investments. You can reduce that cost. Ultimately, you could broaden access. More people could participate in ownership and more people could benefit from everything that private markets was providing. That was our motivating vision for starting the company. That's really what we've been working on since. And with the way we attacked the problem was by being a partner to GPs.

4:42So today we're a partner to almost 2 ,500 GPs across all asset classes, and we help them with technology data and fund administration solutions. But we chose to, instead of trying to build a marketplace or instead of trying to focus on LPs, from day one of the company, we've been very focused on GP as our customer. Yeah. So if you go back to 2013, I mean, there's a few things happening around that time. So you're right. The private markets obviously got bigger. Companies are staying private longer, more funds being raised. I forget what the count is today, but But even during the 2010s, during the Zerp era, we saw tens of thousands of new firms across ask categories, regions kind of form.

5:20But on the other side of the marketplace, let's look at the LP side. So you had this experience as an LP. I did too, starting in 2010, when I was doing these investments in privates. And I'd get these PDF, you know, like envelopes that I had to fill out and subscribe to. And then they would tell me I did a bunch of things wrong. And I'd have to redo them, resign them. It was just a total nightmare. Well, at that time, it was mainly institutional capital that was investing in a lot of these big funds. But there was that start point of the individuals, the family offices, starting to deploy more into the private markets.

5:55How much of that was evident to you as a big sort of meta driver of where you wanted to build it? And was that something that you were building around that more people are going to actually invest that are not institutions in these private market funds, and that you needed to create something that acted as the infralayer? Well, we began our journey by focusing on real estate GPs. So today we serve private credit, private equity, crypto, all natural assets, venture capital, all the private markets asset classes today. But when we first got started, we were laser focused on real estate managers.

6:30And one of the interesting things about real estate is that it has a higher proportion of managers who were already raising through the broker-dealer channel. They were already going direct to high net worth offices. They already had family office relationships in a way that was very different from, say, how your typical VC fund thought about fundraising in 2013 or how a private equity fund did. And so because of our go-to-market strategy and our focus on real estate initially, every new manager that we added, we would onboard all their LPs. Now we have, almost 700 ,000 unique LPs on our portal.

7:07And so we could see this, the lion's share of the capital still came from the large institutions and it still does today. You know what I mean? We're all extremely excited about retail and the wealth channel because of its prospective benefits, not because it's contributing the lion's share or any capital raising today. So we can still see that, look, your typical giant public teacher's pension fund or your typical giant sovereign was still contributing a lion's share of the capital on our platform. But we could see this huge fat middle of sort of family offices, wealthy individuals who were writing multi-million dollar checks to each individual manager, each individual position.

7:49And so we knew there was this very deep kind of like vein that managers were going to be able to tap. And we also knew enough to know the difference between LPs who want to go direct into privates and they want to self-direct their own investments. They want to pick managers and underwrite investment criteria, manage it themselves. And then those who are just going to buy through an advisor. And we could see that the typical kind of like $50 ,000 type of investor who wants to go direct was unlikely to amount to much. And around the time we started the company in 2013, everything that was in vogue at that time was the JOBS Act, which had just passed.

8:31And therefore, all these companies that were getting started around that time period focused on alts were crowdfunding companies by and large, especially that's true in real estate. And the dominant thinking at the time was crowdfunding is going to be the way that alts get democratized and GPs and LPs will just connect directly online. And we could see pretty quickly that was unlikely to be the case because of just both the adverse selection characteristics. And because of this dynamic that I'm talking about, the TAM being very limited of retail investors that have the capacity to self-direct in a meaningful way.

9:03And it's growing. And the amount of wealth capital going into privates has increased over the last, let's say, 10 years, pretty dramatically to a point where now there's some firms out there, be it the Blackstones of the world, they have dedicated teams that just go after the wealth channel. But there still is this fundamental issue for a lot of these managers of if I bring in people that are part of the wealth channel, like maybe individuals, families, friends, and that want to invest these small ticket amounts, the administration can actually be much harder than it is for like that big institution that's writing a$50 million check.

9:38They have a team, they're going to meet the capital calls. For individuals, it's much, much harder. How did you think about solving that problem? Yeah, that is absolutely true. I mean, in certain respects, whether it's a$50 ,000 investor or a$50 million investor, a lot of the administrativia is the same. A lot of the work to manage the position and so forth. And so there is an incentive to within holding all else constant, you want to maximize the check size. So a lot of our investment in technology in the early days was about helping managers. Because we had real estate syndics, it's not that uncommon in real estate that you might have a manager that's grown to say, I don't know, a billion dollars of equity solely by raising capital from thousands of high net worth investors, right?

10:25And networks they've built themselves. So we had customers in the early days that had thousands upon thousands of investors they had to manage. So we had to build the tooling for how do you do a capital call to 2 ,000 people? How do you upload 2 ,000 K1s at the same time? How do you do a waterfall calculation when there's 2 ,000 recipients and so forth? And that kind of problem software is obviously really good at, right? It's like you use the computer to do something 2 ,000 times that the human would have to do at once that the human have to do individually. So a lot of our tech investment in the early days was about helping GPs honestly be indifferent to the capital source, whether it was a complex sovereign wealth fund and all of their complex reporting requirements or the scale requirements of a high net worth investor.

11:10When you look back at kind of the early days, my feeling just having been in this sector now for four years, actually running a company is I continue to be pretty surprised by like the primitive nature of the tools that are still being used today. I can't even imagine what it was back in 2013, but it does feel like a lot of this is still running off like MS, DOS, Windows 95. And I just actually, you know, I think the biggest innovation for some of these groups is just using DocuSign, which is hard to believe, but it's true. Were there anything, any unique insights in the early days that surprised you that were material pain points either for LPs or GPs that going into when you started the company, you didn't really realize?

11:51Well, in the early days, we spent a lot of time trying to answer the question, why has this problem not been solved before? Why is it the case that the private markets are so behind in terms of technology adoption relative to their public markets peers? And we wanted to make sure we had a lot of confidence in our answers to those questions so that we made sure we were starting a company for a good reason and that we were going to be focused on the right problems. And some of it has to do with the role of the regulator in public markets and enforcing data standards, enforcing points of data aggregation and centralization.

12:22But a lot of the technology challenge for any vendor that we've had to deal with over the last decade is just the sheer kind of range and heterogeneity of the way things get done in the private markets. right? So because they're private, because you're not registering the security, luckily with a regulator, you know, your limit on how reporting should work or how the accounting should work or how the waterfall should work or how it's really only limited by what a GP and LP and their attorneys can't come up with to get a deal done. And when you're in that process of raising money and you're meeting with that sovereign wealth fund and they're like, all right, I'll give you a$250 million check, but here's the deal.

13:02Here's my custom reporting template that you're going to have to agree to, you're just going to say yes, right? You're like, get the$250 million commitment. We will figure out the operational details later. Of course, you do that a hundred times and all of a sudden you have a hundred different side letter reporting templates that you have no idea how you're going to satisfy. And so, so much of the problem is how do you build software that delivers the automation benefits across such a heterogeneous space of configuration requirements? where we have 2 ,000 GP, 2 ,500 GPs, almost 40 ,000 funds on Juniper Square.

13:37And so those 40 ,000 funds vary so widely in how they do things. And there's such a long tail of complexity in the way things get done. And a lot of our early kind of design thinking and principles was basically kind of following Intuit and TurboTax as a inspiration here, right? Where Intuit is not under the illusion that they're going to get all 50 states to agree on a common tax code, let alone all the municipalities and all the county and all the relevant jurisdictions. And so you start with the premise that you're just going to have to deal with thousands of different jurisdictions, and the code is going to interact in weird ways.

14:17And then you got to build a software solution that recognizes that complexity. And you focus on that. You don't waste any time trying to get people to agree on standards. And that's how we've approached things in building Juniper Square. And we're very supportive of groups like ILPA and INREV and NREV and reporting standards and all of these groups. And if one day every GP and LP all agree on a common data standard, we would like be singing from the rooftops. We would benefit hugely from that. I just am not a, I'm not, I don't think that's happening anytime soon. So we chose to just sort of build into that complexity and we benefit from that now with scale and time on the problem.

14:52Yeah, I agree with you. I think there's been a lot of groups that have looked to standardize. I mean, the reality is there's so many different reporting. Even the way things are presented, whether it's a partner's capital account statement, a financial statement, a capital, they all look and feel differently. And getting, let's call it, millions of different LPs or thousands of thousands of GPs to report in any way, I think it's going to be very tough to create a normalized, digitized standard to do that. And I think that's probably too far a bridge right now. And I'm not sure that's the biggest issue.

15:20I do think that from a GPLP standpoint, because you have so many more participants on both sides, you have far more managers across the globe right now that are across these asset classes, whether it's real estate, private equity, credit, growth, all these things. And then, of course, you have the Wealth Channel, which adds so many net new LPs that are coming in. Have you seen any tangible difference in terms of managers that are using like Juniper Square, for example, that really create a better LP experience to see things like their data rooms, be able to sign up, be able to get reporting in a nice, elegant way?

15:53Has it helped, you know, sort of, you know, create this level of trust that has allowed fundraising to be faster, quicker? Any data that you can sort of look back on and say using Juniper Square has done X? I mean, I think it's tough to, I mean, you can do all kinds of things to pretend to quantify that if you want. I think if you're being honest, it's a tough thing to quantify. And so what you rely on are proxies, qualitative proxies in terms of customer sentiment, right? So if 98 % of your customers are renewing and they're saying, oh my God, this has totally transformed my ability to deliver a compelling investment experience, you can probably sort of rely on that statement, and having some kernel of truth to that.

16:36Even if you can't say, we have done studies in the past. We absolutely have. Managers on Juniper Square close 44 % faster than managers not on Juniper Square. They're just all bullshit. All that stuff is bullshit. And so the reality is we like to call ourselves a fund operations partner to the GP. You've got the limited partner, you've got the general partner. And then what we're telling our customers is we'll be your fund operations partner, which means we'll help you with fund administration. And within that compliance and treasury and all the whole reporting and all the bundle of stuff in there, But we can also solve your technology problems and we can also solve your data problems.

17:08And so the benefits from that type of approach are either streamlining operations, right? Make it more secure, more efficient, better, enable you to scale faster or scale with the same resources you have, which is a huge benefit that customers report, right? Which is like, I bought Juniper Square, was at 2 billion of AU, and I had three people in the back office. And now I'm at 10 billion of AU, and I still have three people in the back office, right? And I thought it was going to have 30. So scale faster, more efficiently, or enhance the investor experience. It's like one of those three things that is the primary value prop of what we do for customers.

17:43And I think we're regarded as the leader in the LP experience and so much of it. Like when we came to market with our portal in the mid-teens, the dominant paradigm at that time was portals are for PDFs. That is what it is. It's a, you upload a PDF and then the LP downloads the PDF. And we had this product that enabled the GP to show live data to the LP. And that was really radical at the time. This idea that the GP would let the LP see exposure data, performance data, yield, DPI, TVPI, whatever, live in the portal felt scary and risky. but we were again coming at this naively with a public markets view and it's like yeah when you log into charles schwab yes there's a place you can get documents but that's not really where you spend your time you're looking at pages of data that tell you things about your account so we knew that people would want that for the private markets too and so much of the power we do is how do you take 40 000 funds that own hundreds of thousands of underlying assets and spds and all these complex structures wind them up through thousands of managers and then all of the lps on Juniper Square have a single login to all managers, right?

18:48So a central place to manage their portfolio, their contact information, their account details. And we'll build deeper into that over time. Eventually, we don't support all of this yet, but eventually we'll get to a place where you can do a one-click subscription for the LP because you got all the data soared. And so it's managing that tree of complexity from an underlying asset through thousands of managers up to a coherent view for an individual LP. It's actually really hard to do and do well. Yeah, when you think about the convergence, let's call it the convergence of the public and private markets.

19:19Obviously, the private markets are getting bigger, the number of public companies has decreased by basically half, like you had 8 ,000 plus public companies in the US in the 90s. Now there's about 4 ,100 roughly. And so there is a lot of transparency, like I can log into Fidelity or Schwab or Robinhood, and I can see all the details real time, very easy to kind of buy a stock, sell a stock, all those things. And in the private markets, of course, LPs want a lot of transparency. But what surprised me actually when I talked to a lot of GPs over the years is like, sure, we want to give them the reporting, but maybe we don't want to give perfect transparency on things.

19:57Is this something you've seen as well? And has that changed over time in terms of the amount of transparency GPs are willing to drive toward those LPs? It's definitely changed a lot over the 10 or 12 years we've been working on this problem. and it definitely is still very far from where the public markets are. What I would say is that I think the best managers recognize, they can just look to sort of public market standards, look to a Morningstar report on a mutual fund manager, look at the breakout of fees and the gross to net walk and all of that. And I think the best managers recognize, that's sort of where the industry is going.

20:38That's where groups like ILPA are pushing and so forth. And so the best managers are just saying, okay, well, I need to prepare myself for that. I don't need to necessarily lead it, right? I can be led by LPs and I will go where the market needs me to go. And that's sort of what we see, but it's a really wide spectrum, right? I mean, there are still some managers on our platform who are like, I don't want to disclose nothing to my LPs, right? Like I'm going to give them a check when I give them a check and they're going to be happy or not be happy. And then we have other managers that are like, no, if I give one bit of data to one LP, I'm going to give it to all LPs.

21:16And I provide, you know, if you're like in real estate, this is not common in venture, but it's not uncommon in real estate that you're providing the full set of financial statements, the full P &L, along with a whole bunch of operational details on every single underlying asset in the fund. Every building, the rent roll, the lease roll, the, you know, the NOI, the lever to your major LPs. And so I do think the industry has trended a lot towards more transparency since we've been involved with this. I think that the limit is probably not exactly what the public markets looks like because there is a lot of scarcity value to the strategy that is revealed in the investment data.

21:53And there's a lot of overlapping interests in the private markets world that are a little different than the public markets in that one day you might wake up as a GP and find that one of your LPs is now competing with you. Right? And you're like, well, hold on a second. Let me take a look at what I'm providing. Am I reporting to this LP who's now my competitor? And so I think the limit will be what is information that is truly equal to the strategy. Yeah, because there's a lot of investing strategies where they are capacity limited. You know what I mean? Like you can only put$5 billion a year to work in this particular type of trade.

22:34And it's not going to scale to 50 billion or ARBs out if you overscale it. So there's a bunch of those types of pockets all across private markets where they're capacity limited. You can have 50 managers doing that strategy. So keeping that type of detail private, it's a good thing. It's essential to the strategy. That's probably different than I really bury my fees and I don't make it obvious to the LP how to do the math on the gross to net walk. That kind of thing, there's going to be just one way ratchet on pressure. And we are, I think, going to end up with the Morningstar type report where there's a sort of standard framework for how you think about fees.

23:12And so I see it going on two different vectors. Do you see distinctions between asset class and, you know, of course, things like venture, they're generally more sensitive to the underlying companies. Yeah. You don't get the level of reporting of like, how are those companies? Maybe there's some qualitative letter that's written, but it's not like to the extent that I might see in a real estate fund that I'm in. And then, of course, there's a different regulatory standard of like a private equity fund that's an RAA versus a lot of ventures under the VC exemption, which puts them as an exempt reporting advisor, but not a traditional RA that's governed by the SEC.

23:46Anything you can speak to in terms of the differences between asset classes or types of regulatory oversight a manager may have? One thing is, okay, so one is, yes, it varies massively. I mean, it's crazy the difference between the reporting burden on a typical, let's just say like midsize real estate manager and a typical mid-sized venture manager. And it's sort of, if you're a venture manager, it's hard to understand and compare it because you own a minority position in the C-Corps and the C-Corps are their own entities with their own agency, and they may not be willing to disclose financials with you or they get a limited set.

24:24And you have no ability to enforce, I don't know, standard reporting, standard charted accounts and things like that over your companies. Whereas if you are a real estate firm and you wholly own assets in your fund, then those are your assets. There's no one, maybe you have a JV partner or something, but it's yours to define the standard around. So real estate by far and away is the most complex. And I'd say venture is the most simple. And then credit and private equity and other assets and crypto and so forth kind of fall in the middle between those two poles. And then the other trend I would say is like we see a lot of our customers who used to rely on the exemption moving toward registering.

25:00And I think it's just to open up more freedom across investing strategies. So funds can be more multifaceted. I think a lot of the traditional boundaries are kind of breaking down in some areas of the market. So like an example would be a trend toward GP stakes investing more broadly. It's particularly acute in real estate right now, or shifts toward doing like more MEZ and kind of credit type. Secondaries. Secondaries. Yeah. Yeah, it's just like the markets move quickly. And I think managers are increasingly realizing, wait a minute, I want to be able to deploy. I don't want to raise a fund on a really narrow mandate and then have that mandate not be relevant to where the market is at the time.