When onboarding a venture fund at Carta, Tim Flannery told Built In he would have to manually transfer information from a 50- or 100-page subscription document into a Microsoft Excel file.
Onboarding an investor can often take days or weeks, Flannery said, which is why he and other leaders from Carta’s investor services team developed Passthrough. The startup automates investor onboarding and transitions the processing of subscription documents into an automated 20-minute workflow similar to TurboTax.
Passthrough, a NYC startup, announced Wednesday that it landed $10 million in Series A financing, bringing its total funds raised to $15 million. The funding round was led by Positive Sum with participation from Motley Fool Ventures, Broadhaven Ventures, Company Ventures and Great Oaks VC.
“Passthrough solves the friction of closing funds and is adding additional workflows that improve investor onboarding at every layer,” Positive Sum CEO Patrick O’Shaughnessy said in a statement. “Every investor I talk to feels the pain in fund closing, and to have a company like Passthrough inventing solutions makes operating a fund so much easier.”
Passthrough has a current team of 26 employees, most of whom work out of the company’s office in NYC’s Financial District. Flannery said he expects Passthrough to double its employee headcount this year as it prepares for growth across all departments.
The Series A funds will mostly go toward marketing and research and development. Flannery said investor onboarding will need to become much more streamlined in the future as high-net-worth retail investors show more interest in private equity and other investment vehicles.
“You’re seeing all this interest from fund managers to [let retail investors in], but a $100 million check that you get from Harvard Management Company takes significantly less work to manage in the onboarding process than a $50,000 check from a high-net-worth individual,” Flannery said.
Passthrough is currently developing an embedded API that will allow fund managers to close deals by integrating with other platforms — and allowing other fintech platforms to build on top of it.
When starting Passthrough, Flannery and his team immediately wanted to clean up the unstructured data in subscription documents so that the investor’s information can be saved and reused the next time they join a fund. Structuring the data also allows the information to be pulled into a customer relationship management platform or other software systems.
“We take any subscription document — it doesn’t matter who wrote it — and we can build a custom workflow,” Flannery said. “That way, people are only answering the questions that are relevant to them.”
In order to create these custom workflows, Passthrough had to tackle the inconsistency of questions across documents from different law firms. Some law firms will, for example, refer to the legal entity name as an investor, while another might refer to them as a subscriber. Passthrough looked through the tens of thousands of questions on these subscription documents and identified 800 data points that addressed all of these questions. The company’s software currently addresses 218 of those data points, and it expects to reach 500 data points by the end of Q1.
“We’ve done the hard work of actually understanding what all the answers mean, so even if somebody asks a totally different question, we can make it really easy,” Flannery said. “The next time they come through Passthrough, it becomes a quick checkout experience to invest into a fund instead of this long, laborious process.”
In addition to automating subscription document workflows, Passthrough recently launched a know-your-customer and anti-money laundering compliance product that collects more detailed investor information and screens it against domestic and international sanctions lists.
