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October 21, 2021

A Guide to Onboarding Investors in Venture Capital and Private Equity Firms

Key takeaways:
  • Venture capitalist and private equity firms run the risk of losing investors to a lousy onboarding process.
  • The cost of manual onboarding is more than monetary. It saps time and resources.
  • Digital onboarding eliminates common pitfalls and helps to automate crucial steps like investor document verification.
  • House your onboarding process in one complete platform, no more jumping from email, to PDFs, to paper-based processes.

Ready to onboard a new investor and dreading the weeks you will spend getting them approved? You're not the only one! One study by Kofax found that the average time to onboard high-net-worth clients takes a staggering and exhausting 41 days. The abundance of red tape, bureaucracy, slow paper-centric onboarding, and sluggish communications all contribute to an experience that may even have clients drop out half way through onboarding.

The truth is, when you leave onboarding to clerical staff or handle it using legacy processes, you negate all the time you spent on prospecting investors. Nowadays, it needs a little more flair than that! As one of the most critical stages of the client lifecycle, any VC or PE firm will have a massive leg up on competitors if they provide an efficient onboarding process in a short amount of time. The art of onboarding new investors isn't rocket science. Our no-code system busts through all the most cumbersome dealings, making the process fluid and pain-free.

What the onboarding process looks like now

The typical onboarding process for new PE and VC investors is centered around a series of PDFs, emails, calls, and manual labor where several team members are expected to keep track of a moving operation. Not only is it labor-intensive, but it unfolds over several different platforms, making it chaotic for everyone involved.

Once you're ready to onboard an investor, you have to rely on them to provide sufficient information, which is rarely done without errors. This includes long and demanding legal documents dictated by registration PDFs with mountains of text, plus you must consider that many documents take some time to acquire. Just imagine it from the client's perspective, they complete a series of forms and gather all the proper documentation, only to then be asked for more supplementary information. This is a significant source of frustration!

For example, if you require a source of funds proof, and salary is listed, then the client's last 3 months of salary and job title documentation are needed. Official papers like these can take a while, you don’t want to add any more time to the clock. This entire process increases time-to-revenue and eats up valuable hours that could be better spent.

What are the challenges & pain points when onboarding?

The main drawback for VCs and similar companies is the cost of onboarding. If your fund is smaller, cost matters, and teams may not be confident in their abilities to execute an onboarding in an effective and compliant manner. Young companies tend to make mistakes as steps can be overlooked, and even seasoned VCs face challenges as regulations change on a whim.

On top of that, onboarding can feel like drawing blood from a stone. Some estimate the manual onboarding process averages about 10 individual contact requests towards the client and submission of between 5 and 100 documents. Issues like this need to be addressed because insufficient information and documentation prolong the onboarding process and increase costs. Not to mention the painful back and forth over email with clarifying points and chasing the client.

Once an investor has been onboarded, you also have to consider performing ongoing due diligence. This process requires VCs to ensure that the business relationship, including the activities and transactions within it, is consistent with your knowledge about the customer, their business, and risk profile. Manually collecting, verifying, and updating can be time-consuming and tedious.

While many VCs use a 3rd party agency to handle all their KYC, the process can become lengthier and leads to a slew of redundant communications, which can be eliminated with HelloFlow. This entire onboarding experience can be optimized with a bit of automation, creating a digital and user-friendly solution. Want to know how to iron out the kinks? See how HelloFlow can help in under a day.

A man filing in documents
Digital onboarding can significantly decrease paperwork as most document-based processes can be automated.

How can HelloFlow help?

HelloFlow transforms how you onboard anyone by digitizing the registration process. More than a tool to collect data, it reduces errors made, eliminates wasted time, creates consistency, ensures compliance, and verifies legal materials. Not only is it easier to use, but onboarding also happens much faster. For example, you can save time by automatically requesting specific documentation from your investors based on their previous answers within the onboarding flow. Allowing you to get all the necessary information you need in one go.

Rather than sending your investors a PDF with long legal texts, have all terms and conditions unfold online in one place. Allow them to digitally sign and agree with just a click of a button. With HelloFlow, the more automation, the better and faster your business can operate. You can easily add vital services to help you verify critical information like PEP and AML scans, identity verification, UBO verification, and more.

When everything lives in one place, there's no longer a need to jump back and forth from emails to PDFs to paper-based processes. HelloFlow gives you a clearer understanding of what’s been done, the information on hand, a more precise timeline, curbs client frustrations and also eliminates the chance of work being done twice.

Once onboarded, HelloFlow's client monitoring solution allows you to use a combination of KYC and AML services to screen and automatically monitor existing investors on an ongoing basis, without having to hassle the investors for information every time.

Having a modern onboarding system like this creates a strong impression on new investors. Not only does it create a sense of trust, but it also demonstrates that you have higher capabilities than other similar funds. Impress investors by providing a hassle-free onboarding process that sets the right expectations for the future. Let us show you how it works! Book a 30-minute demo with us today. You can also create a free trial account and try it yourself.

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