Avoiding a 'Failure to Launch'

Regardless of the term used, startup funds have no easy task in today’s marketplace. A record number of funds liquidated last year; many were nascent—failing to attract capital because of their inability to mitigate risk, to securitize it, or simply demonstrate institutional credibility. In fact, even before they got out of the gate, many had to reengineer after their first execution – and either rethink their methodology or seek out new operational tools that fit institutional investor expectations and budgets.

Unfortunately, this is becoming the norm and the market now expects failure-to-launch funds to make up a good percentage of the 1,000 or so enterprises that exit the alternatives space each year. And it’s not only about cost.

In a recent Wall Street Journal post, David Drake writes, “Outsourcing is a strategy that startups cannot live without. When you start as a one-man show and have to do all things by yourself, you find out soon enough that some things you cannot do as well as others.”  As founder of LDJ Capital, Drake’s words hit with some weight, and we agree.

It’s a tough spot in 2015 for funds to get the engine running – overhead costs are a real challenge, even with smaller headcount (or a single headcount), and the ability to stay competitive amongst the crowd is becoming more challenging by the day. But, in order to spend less on ops and more on implementing the strategy, every startup fund or emerging manager needs:

• A Smarter Investment Core: Cut the hours in-house, with end-of-day trading responsibilities given to a trusted partner managers can avoid the cost and tedium of file transfers with brokers and fund admins, corporate actions processing, reconciliation, and report generation. Instead, if run by a better ops & tech environment, your team can focus on investment strategies and client relationships.

• Follow-The-Sun Support: The next watermark doesn’t wait for downtime to get up again, and is a necessity whether or not a hurricane flooded the floor. Access a team of support anytime, anywhere, and ensure your trading day isn’t interrupted by adverse events – but kept alive by SaaS solutions and mobile technology – all on a single, accurate, real-time book of a record.

• Nurturing Scale: As your business grows in terms of size and complexity, having modern tools that allow for better, smarter, faster and cheaper ways to make decisions and gains may make the difference of lurching forward and hitting your next high-watermark. And in any sense of the term “scale”—more offices, more markets, more allocations, more headcount—you still need to focus on client relationships and uncovering hidden opportunities.

• Constant Advantage: Today’s marketplace is all about data. Accurate and real-time data can mean the difference between competing for new allocations or missing a moment and exposing investments to undue risk. Managers should only rely on a system that supports better data management, in an environment where data is everything.

Our Approach

At Liquid, we've created a hedge fund operating system specifically designed for funds at any stage. It’s a better solution for startups and emerging managers who have less time and money to waste on outdated or inadequate legacy systems.