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Onboarding investors: Simplifying the complex process

· 5 minute read

· 5 minute read

Is your firm sitting on untapped potential for fund formation?

Your firm could be sitting on an untapped opportunity to help venture capital and private equity clients – by digitalizing the process of onboarding investors for fund formation.  

What does this mean? In short, when VC or PE clients attract investors to a fund or asset, they first need to onboard them. This involves carrying out checks and vetting processes, for example, to confirm the investor is legitimate and their capital has been acquired legally.  

This process involves “KYC” (know your client) information, due diligence and identification.  

Many VC or PE clients are looking to law firms to make the process fast, discreet and simple. 


What steps are involved with onboarding investors?

By law, in the US and Europe, investors are required to perform these onboarding checks.  

Typical steps in onboarding investors:  

  • Gather: Collecting investor profiles and complete the onboarding process all in one place 
  • Review: Managing all incoming onboarding requests and managing the workload and progress 
  • Draft: Draft Subscription agreements and other documents  
  • Close: Creating all necessary documents and storing in one secure place 
  • Sign: E-signature management of Subscription agreements and other documents 

While the above steps make it look simple, typically, it’s a complex end-to-end process, involving multiple emails, forms and back-and-forth communication with each potential investor. This way of communication is not the most effective use of time for anyone involved – the investor, the client, or your firm’s associates. It could also damage your firm’s reputation, when clients pay significant fees for a service that they could perceive as outdated or inefficient. 

It also presents a number of risks, including data security and GDPR compliance, especially around identification sources, as well the risk of not capturing all the required information correctly. Some investors may even find a slow and complex onboarding frustrating enough that they decide to back out of their investment and take their money elsewhere.  

For these reasons, onboarding should be made as simple as possible for everyone involved. 


The solution is digital

To meet all the legal requirements and client expectations involved in onboarding, your firm should explore implementing a digital platform that can handle every aspect of the process and automatically prompt and guide investors through each step. 

The solution should flag where there is missing information for the investor to complete, store every application and document in one central place that’s accessible from wherever you’re working, and automatically generate and send the subscription agreement for the investor to digitally sign once the onboarding is complete.  

This last point is particularly important. By structuring onboarding questions in a certain way, the subscription agreement can be created and populated using the data the investor has entered. This also saves your associates time and reduces risk of manual error. 

The advantages of digital onboarding 

  • Faster capture of required data 
  • Higher data security 
  • Regulatory compliance 
  • Professional service 
  • Lower cost 
  • Protects firm’s brand reputation 
  • Can scale to service large numbers of clients and investors 


How to get started

Investor onboarding in the fund formation space is a potentially significant new revenue stream for your firm. And the good news is, you don’t need to make a huge technology investment to enter this space.  

In fact, you may already have the technology in your toolkit.  

“A lot of law firms already have HighQ. To use it for investor onboarding, all they need to do is load the template from the Thomson Reuters Marketplace and get assistance from Thomson Reuters with the final configuration.” 

–  Sebastiaan Bos, Director of Product Management (Customer Solutions), Thomson Reuters


Interested in offering this investor onboarding service? This blog uncovers more about the future of digital fund formation services for law firms. 

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