VCFA Group is a private equity firm that specializes in buying secondary interests in venture capital and growth equity funds, as well as private companies. As companies stay private for longer, VCFA’s secondary funds serve a growing need: LPs in venture funds and investors in private companies often need access to liquidity that their investments haven’t yet produced. VCFA is able to provide early liquidity to these investors by buying their holdings in companies and funds.
“Our firm was founded in the early 1980s by Dayton Carr, who had been managing a venture fund for Thomas Watson, Jr., president of IBM,” says David Tom, co-president at VCFA. “When Watson was appointed ambassador to the Soviet Union in 1979, he divested his private equity assets. Dayton bought the venture fund and then founded VCFA in 1982 to pursue a similar strategy of buying venture capital on a secondary basis. That’s often considered to be the start of the secondary private equity market, and so really much of the secondary market flows from VCFA.”
The investment team at VCFA was in the middle of raising its tenth fund when they decided to survey the market for fund administration providers. After vetting multiple potential partners, VCFA saw Carta as best equipped to manage the complexities of their funds’ structures; offer best-in-class service; and enable them to offer a great experience to their LPs.
David Tom, Co-President
Teaming up with Carta enabled us to focus on our core competencies and scale faster as a firm.
Focusing on Core Competencies and Scaling
With a new fund finalized, David and his team were looking to focus on investing, instead of spending time building back office operations. “Teaming up with Carta enabled us to focus on our core competencies and scale faster as a firm,” says David. “It’s been great to be able to pass our back office management and operational support to an expert that specializes in this type of support.”
The team also chose to lean on Carta’s experts to manage ASC 820 valuations. “Historically, we had handled the valuations process in-house, but wanted to move to a third-party option to ensure we were getting an outside perspective,” says David. Valuations are central to evaluating a fund’s investment strategy, and shifting that function to a partner can be a difficult decision to make. With this in mind, Carta has built a team that specializes in that valuations process, having overseen thousands of company valuations to date. “We recently had two companies sold. The valuations the Carta team provided were surprisingly close to the sale price,” says David.
Carta also offers the ability to easily form and manage SPVs, a strategy that VCFA had not previously pursued due to personnel constraints. “SPVs were something we’d long looked at, but just couldn’t ramp it up at the right speed that we would need to,” says David. “Having Carta as a resource allowed us to add this to our strategy and enabled us to scale more quickly than we could have on our own.”
Best in Class Service
When managing millions of dollars in investor capital, you need to be able to trust your fund administrator not only to be in sync with your team, but also to see around corners. “Our experience with Carta’s team has been stellar,” says David. “We really view our fund administration team as an extension of our firm because they intimately understand the needs and complexities of our funds’ structures and investment strategies. We communicate constantly, and we look to them to ensure we’re staying on top of day-to-day needs, while also flagging future potential issues.”
David pointed to VCFA’s capital call line as an example of Carta’s superior service. “Carta’s team regularly tracks our capital call line repayment timeline and proactively alerts us if funds on hand are running low,” says David. “This attention to detail and forward-looking thinking gives us confidence that Carta’s team has a holistic view of our firm and its needs.”
Elevating the LP Experience
While VCFA has been in the business for decades, the team and fund sizes have remained concentrated. In evaluating fund administration providers, David prioritized having a fund administration that could offer a top-notch LP experience, which can be tough for a smaller team. “I really felt that Carta gave us the tools we needed to give our investors a high-quality experience that is often only offered by larger firms,” says David. “When comparing options on the market, we wanted to prioritize having better communication with our investors. Carta enabled us to easily send detailed updates to our LPs on a consistent basis, building trust along the way.”
Leveraging Carta as a fund administrator can also have added benefits on the fundraising trail. For VCFA, leaning on the partnership with Carta made it easier to pitch potential LPs for their most recently closed fund. “We’d gotten a lot of feedback from certain investors that having an outside fund administrator involved would give them confidence in the reporting and in the security of communications,” says David. “Carta is a known expert in the space, so it made those conversations easier.”
A piece of advice that venture investors often give startups is to focus on what they’re uniquely positioned to do. For VCFA, that same advice is what has propelled the firm forward, in partnership with Carta. “Handing off the fund administration work to Carta has given us more time to focus on what we’re best at: value-driven investing,” says David. “From a better LP experience to having an all-in-one view into our portfolio via the investor portal, we’re glad to have Carta as part of our team.”