Our investment in Accelex — digitising private markets workflows

Investments in private markets have tripled in the last decade as investors search for improved risk return compared to public markets. However, the workflows of investment professionals in the sector remain largely manual and lack the level of analytics of modern trading systems. Underlying this is a complex unstructured data challenge with varying standards, formats, and approaches.

Accelex automates the extraction of fund and company information from unstructured data sources such as PDF files, saving analysts hours of time to focus on examining the information and dramatically increase productivity.

We are excited to co-lead this oversubscribed $5m round alongside Albion VC, with participation from SixThirty Ventures and Expon Capital.

The rise of private assets

Assets under management (AUM) in private market funds more than tripled between 2010 and 2020, bringing the total invested capital to $7.3 trillion globally. The rise in AUM has brought about a rapid expansion in the private funds universe, which for the first time has surpassed the number of hedge funds in existence at approximately 11,000 around the world. The private equity segment has seen the largest growth with a CAGR over 9% between 2015 and 2020.

Data overload

Information in this market isn’t standardised or structured as it is in public or some derivatives markets. To analyse information on companies or funds, analysts must sift through spreadsheets and long-form text documents and copy and paste this data into their own models. We experience this first hand as a venture firm, where we store thousands of pitch decks from companies that we have met. Analysing a cross-section of these companies would be impossible without going through each of the documents and extracting the information required manually. The problem is more acute at the higher end of the market, where buyout or growth funds receive documents that are hundreds of pages long.

The challenges faced by LPs in funds

Up till this point, I have spoken about private markets broadly. But it is important to specialise and focus on solving a problem well to break into a market that isn’t very tech savvy. One segment of the market that is experiencing a particularly acute challenge on the data at their disposal is Limited Partner (LPs), or investors, in private markets funds. These include fund-of-funds, pension funds, endowments, insurance companies, and other large asset owners who have allocated to the sector. Some now hold positions in hundreds, if not thousands, of funds and therefore in tens of thousands underlying companies. These LPs receive performance information about their fund investments on a quarterly basis, usually in PDF format. This information is currently extracted manually to be fed into portfolio management and reporting systems by specialised individuals who know how to read these documents that can be 50–100 pages long. Most are extracting only 10–20 data points per report, some are resorting to statistical analysis to estimate the performance of their underlying investments.

Many LPs are now looking to automation to help them address the data challenges they face. A survey conducted by the ILPA (International Limited Partners Association)in 2020 found nearly 60% of respondents were looking at implementing new technologies in the next 12 months.

Accelex

The LP challenges above are exactly what Accelex looks to address. Their extraction engine automatically extracts information from fund documentation including quarterly reports, drawdown notices, and capital statements. It is not just fund level information that is extracted, but the data regarding the funds’ portfolio companies as well. This gives the LP an accurate picture of their underlying holdings and allows them to run cross-sectional analysis of sector or geographic performance.

In the future, having this data available will allow LPs to benchmark their fund investments’ performance in a way that hasn’t been possible before. We believe that this piece of the infrastructure will be a fundamental driver of digitisation in the private markets investments world.

Investing in a team with deep sector expertise

For an early stage business, the Accelex team punches above its weight. The depth of knowledge and expertise in the founding team, coupled with their ability to attract top level talent is what convinced us they were a team to back. Franck (CEO) & Michael‘s (CRO) previous venture, Expand Research, was bought by the Boston Consulting Group in 2016. They bring a strong company building background and enterprise sales capabilities. They are joined by third Co-Founder and Chief Product Officer Nicole, who brings an expert view as a private markets investor. Finally, their tech team is lead by experienced engineers Kodjo Klouvi as Chief Architect and Philip Mortimer as Chief Data Scientist.

We welcome the Accelex team to the Illuminate portfolio. Our deep financial services network has already generated a handful of prospective clients for the business. We’re excited to support them on their next stage of growth as a leader in this category.