And the nominees are…
When SyndicateRoom first launched it was simply a crowdfunding platform, and with that, had only limited tech needs. A contractor was hired to build a website to list, view and invest in deals. Because of its direct investment model, no management of investors was needed; capital was simply passed onto the companies directly.
As the platform grew so did its tech needs. In 2013 SyndicateRoom began building out a team based in Portugal. That team set about building a tech stack using SugarCRM, which allowed for various modules to be added on, providing increased functionality.
In 2017, following a sizable funding round, Graham Schwikkard (now CEO) joined the business as COO. “My focus at the beginning was on mapping everything out; building process maps from getting companies to work with us through to reporting to investors on their portfolio,” he recalls. “It was a mess! There was a lot of information sitting on word docs, such as the process for reviewing companies, and nothing that could be put into a database and analysed.”
In organising the company’s data and getting familiar with the tech set up, Schwikkard identified key problems. “I interviewed everyone in the company to find out what was going on and they all said the tech was slow; that it was taking up too much time and it was inefficient.”
The way in which the tech had been developed - using SugarCRM and bolting on additional modules - had resulted in a complex infrastructure, with code written in different languages, making it difficult to maintain and requiring more people to be brought in with different skills. “It got to a point where we had 14 developers but were still struggling to sort out the backlog of work,” says Schwikkard.
As complexity grew, with more dealflow and investors, Schwikkard was tasked with focusing purely on SyndicateRoom’s tech. “The first thing I did was to bring in someone to our Cambridge office with coding experience. I can code, but we needed someone with experience who could understand the whole stack.”
Next was rebuilding the entire website and backend. “Because the previous set up was the result of multiple bolt-ons, it was always going to be limited. Also, it was written in PHP, which isn’t very agile,” explains Schwikkard.
Alongside making the decision to rebuild everything, Schwikkard had to also reconsider the Portugal team. “I was travelling to Portugal frequently, and it was almost as if the team out there had created a separate company with its own distinct culture that wasn’t aligned with ours.”
Schwikkard had two options, keep the Portugal team in place, or start all over again. He went with the latter and decided to build a team in the company’s main office in Cambridge. “Recruiting is challenging and the market for tech talent in Cambridge is competitive.” However, by focusing on a small team of capable developers, SyndicateRoom was able to reduce its tech team down to just three people. “Although the Portuguese team was cheaper per person, by hiring a more experienced team we’re able to be much smaller,” he says.
Furthermore, working in close proximity solved the disconnect the teams had been previously suffering from, which led to huge efficiency increases. Says Schwikkard, “It took us about three months to get the website rebuilt.”
Site for sore eyes
In rebuilding the site, decisions needed to be made around building for quality or speed. “Pages
were taking one or two seconds to load on the old site, which was noticeable, so we needed to get things done quickly and build the minimum viable product,” says Schwikkard. “Huge credit to the developers - they worked really hard.”
Rebuilding also allowed Schwikkard and his team to create something based on their own needs, rather than adapting something off the shelf. This has been crucial as the company has evolved from pure crowdfunding to raising its own fund. “The fund has its own algorithm for how it invests, which creates lots of complexity and that’s ultimately why we needed to do it in-house,” he explains.
By 2019, SyndicateRoom made the decision to ditch its crowdfunding offering and focus solely on its EIS offering. It was also during this time that Schwikkard was named CEO. “The crowdfunding aspect was becoming less attractive to growing companies as funds are able to provide more reliable capital, faster. The idea behind the Access Fund was identifying angel investors using our data, and
then partnering with them,” says Schwikkard.
That change in strategy meant another tech rebuild - this time rewriting the algorithm so every investor who comes in has their own sub-fund, which provides them access to the next 50 opportunities. “There’s no existing tech that does that, so we had to build it,” says Schwikkard. This approach also required tech at the front end to keep track of deployments.
Having initially worked with a nominee, SyndicateRoom applied for its own permissions. “Mainly from a cost perspective, but also to be able to keep everything in-house. This way, investee companies only have one name on their cap table, rather than 50 individual investors, which makes tax certificates much easier to manage,” explains Schwikkard.
Bringing home the bacon
Schwikkard and his team identified four core services its fund administrator had been providing; holding certificates, having their processes audited, signing off on any resolutions and holding client capital. “When it came to portfolio management, they were simply holding the certificates and taking instructions from us. We were still responsible for obtaining the share certificates. Their role was easier but higher risk in terms of the FCA. But in terms of workload, we still led communications with the investee companies and investors. So all we were missing was the technical side of it.”
Because SyndicateRoom was already handling capital via the platform, and making transfers, really, the only tasks it needed to get up to speed on was handling share certificates and the FCA audit. “None of that was complicated, it was all tangible and we saw it was possible to bring it in-house and benefit from the cost savings,” says Schwikkard.
Not only was the cost benefit appealing, but building out the nominee function opens the door to scaling the business. “If we launch more funds, each would have its own nominee, which gives us control, flexibility and the ability to move quickly.”
Indeed, the decision is already paying off, with new institutional investors allocating to SyndicateRoom partly on the basis of having the nominee in-house. “No other managers do this in-house so the LP is liable for the cost of the external administrator.”
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SyndicateRoom: quick view
Headquartered: Cambridge, UK
Team size: 13
Strategy: Data driven EIS fund
Portfolio: 220+ companies