Migrating Fund Admin

Migrating to another fund administration offering is typically a straightforward process that can take between three and six weeks. 

Given the recent problems with Carta, numerous managers have initiated a switching process in Q1 2024. In this scenario, the previous vendor, Carta, will close the 2023 books, being double checked by the new vendor. Then, back office and reporting from Q1 2024 going forward will be handled by the new vendor.

The complexity of the migrations is based on the size of the fund, the age of the fund, the number of limited partners and any special terms. Most of the switching work is managed by the vendors. The primary responsibility of the fund manager in a transition is to select a new vendor and supervise the migration process. 

This article delves into the steps involved in seamlessly migrating fund administration, offering insights into roles, procedures, and best practices. Let's explore the steps to ensure a seamless transition.

Migration Process

On a high level, the migration process is simple: decide to switch, pick a new vendor, and the vendors will handle the rest. Here is a more detailed process.

• Decide to Migrate: The initial step involves the fund manager's decision to transition from Carta, often based on specific needs or dissatisfaction with the current service.
• Secure Documents: New vendors will require the LPA, the fund's operating agreements, side letters, the number of limited partners, and an overview of the investments to prepare a quote.
• Choose a Vendor: Select a vendor that meets your requirements, including service offering, responsiveness, technology platform, track record, values alignment, and pricing. 
• Terminate with Carta: Notify Carta of your desire to terminate, ideally including a reason for the termination, and complete any termination paperwork.
• Signs an Engagement Letter: Review and sign the engagement letter with the new vendor, and pay any necessary fees.
• Connect the Vendors: Facilitate communication and data transfer between Carta and the new vendor, and set the desired date for transition, which is normally by the end of the current quarter.
• Assist with Any Issues: Address any challenges or discrepancies that arise during the migration.
• Complete the Onboarding: Finalize the transfer of all fund administration responsibilities to the new vendor, and complete any onboarding to the new vendor systems.

Benefits of Migration

Managers are migrating off of Carta for a variety of reasons. Some reasons to switch vendors include:

• Reduced Errors: New vendors have processes in place to avoid mistakes, such as contacting limited partners with wrong information or missing transactions.
• Greater Timeliness: New vendors are often able to meet quarterly reporting timelines and deliver K1s early.
• Enhanced Privacy: Most vendors do not use customer data or limited partner information for co-marketing, sales, or other business lines.
• Values Alignment: Different vendors have different ethical and moral standards, allowing managers to find a values-aligned vendor.
• Increased Support: Some fund administrators provide personalized support and a single point of contact with rapid response times. 
• Expanded Services: Certain vendors include offerings such as KYC / AML, deal reviews, treasury, integrated legal, strategic support, and more.
• Advanced Technology: New vendors often have purpose-built platforms that provide real-time reporting, limited partner dashboards, CRM, data rooms, and more.
• Cost Savings: Alternative vendors have different pricing frameworks, including fixed pricing that can be less expensive with better service.

How to Choose a New Vendor

There are a lot of fund admin vendors, and many of them are overloaded due to the explosion of new venture capital firms worldwide. When it comes to fund admin, quality matters a lot more than price, and it is important that you have the proper amount of support and services. 

• Create a Short List: Identify a short list of vendors to consider for a transition.
• Review the Offering: Review the offerings of each vendor to see which one is the best fit.
• Review the Price: Check the pricing for each vendor, and ensure that you understand any hidden fees, cancellation fees, or other costs, such as additional closings or KYC / AML.
• Check the Reputation: Search for bad reviews and good reviews of the provider online, and check with managers that use the service. 
• Prepare Questions:  Prepare a list of questions to ask the vendor about your actual needs and processes, such as assistance with deals and when reports are sent out.
• Interview the Vendor: Set up a call with the vendor to ask your questions and to provide the necessary information for the vendor to provide you with a quote for the offering and the transition.

Tips for a Smooth Migration

Every migration is unique, as every fund is unique. With that said, there are best practices to make the transition more seamless.

• Organize Your Files: Make sure that you have all of your documentation ready beforehand, and be able to assist as needed to secure any missing items.
• Use Timelines: Collaborate with the vendors to set deadlines and manage expectations around timelines to ensure everything gets done efficiently.
• Stay High Level: Let the vendors do the detail work while you help as needed.

Conclusion

Building a venture capital firm and running a fund requires best-in-class resources to achieve top decile returns, as well as a strong Thesis, hard work, and good fortune.  If you back office vendor is not helping you to be the best that you can be, then it is probably a good time to consider switching.

The switching process takes a few weeks, and most of the work is handled by the vendors. As a manager, if you believe that you can get better service and value, then the right decision is to switch.