Our Investment in Passthrough

@Sam Cates

@February 1, 2023

Few people fully understand the opportunity to build a business around investor subscription documents - even investors themselves. When we met Passthrough in 2021, their vision for how subscription documents are the lynchpin to a much larger opportunity was obvious: identity plays a key role in every part of the investment process, and subscription documents were both the critical and incredibly painful manifestation of this problem. The customers we spoke to deeply loved the product and team, and the traction the company had already generated further proved that they were on to something.

Fast forward to today. Passthrough’s founders have grown the team to 26, with an incredible technical and sales foundation rarely seen in vertical SaaS companies at this stage. Customers from emerging managers to multi-billion dollar asset managers have closed funds in Passthrough, to the tune of 250+ customers (more than 5x from the Seed) and 12,000 investors. The company has proven that subscription documents are the foundation to a powerful investing technology platform, with the announcement of their new KYC/AML product today.

The company has a long list of accomplishments in their announcement, and the broader point is this: when you see a team moving this fast and the market moving right alongside them, you give them more fuel to go further and faster.

The dependencies in running any asset management operation, starting with raising capital from your investors, are complex. Every firm has a different set of people, processes, and tools. A fund’s investors are at the center, and giving them a seamless experience saves both of you time and frustration.

This all starts with onboarding investors, where Passthrough offers a purpose-built solution that coordinates the investors, managers, and lawyers that help complete the transaction. Traditionally funds use a non-standardized offline subscription document, which can take days or weeks to complete while generating many questions (or errors). With a multi-player, fully-customizable subscription document solution that can handle any version of a subscription document, Passthrough immediately delivers a better and more efficient closing process. But closing is just the first step.

Centralized profiles for investors enable Passthrough to simplify any process that requires the use of investors’ identities. Today they’ve just released KYC/AML, which directly attaches to the fund closing process. But beyond closing, so many activities touch investor profiles, like communications, reporting, and taxes. So much of the work funds do touches on data from their investors’ profiles.

Importantly, Passthrough won’t build every one of these products. Better private markets will require a host of solutions, and that becomes more possible with new APIs and infrastructure. Passthrough is introducing scalable technology infrastructure, not just SaaS, to private market investing. Several solutions are already using these APIs to build entirely new investing experiences, opening up access to new investors in the process.

We often tie back the investments we make to themes, the mental models we’re constantly building for what makes early stage companies successful. Passthrough most uniquely exemplifies our belief that some companies build more and more value for their customers over time, creating positive sum relationships. Net Dollar Retention is a popular metric investors often use to define this, where customers love a product so much they demonstrate that love by buying more and more of it. For Passthrough, the opportunity to build a multi-product platform comes from a similar dynamic with their customers.

Ben, Tim, and Alex started Passthrough based on the subscription document insight, and also a deep appreciation for the people that run investment firms. Every product they build aims to help investors and funds work better together, and deepen their relationships. Passthrough is extremely proud to work with the best firms in the world, and we’re doubling down on that strategy alongside them.