Solving The Admin Nightmare For Private Markets with Ryan Eisenman of Arch

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May 12, 2022

On this week’s episode I chat with Ryan Eisenman, Co-Founder & CEO of Arch. Arch is a tech-enabled service that helps private investors organize all of the paperwork associated with their investments.

Collecting statements, tax documents and legal docs from private markets has become a nightmare for investors, and Arch is providing a way to solve that. Ryan

interestingly compares the admin of the private markets to what it used to be for public companies back when companies issued paper stock certificates.

Arch’s tech tentacles into dozens of platforms to centralize data and the flow of information seamlessly.

During the convo we discuss the Arch solution, startup lessons and the fairness of investor accreditation laws in the US. Enjoy.

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‍Transcript (this is an automated transcript):

MPD: Ryan. Awesome. Thanks for being here.

Ryan Eisenman: Mark. Happy to be here. Thanks for having me.

MPD: Okay, let's start off. Can you give us an overview of your company? Let's

Ryan Eisenman: start at the top, starting at the top. All right. So we are what we call a digital admin for private investments.

So what does that mean? What this means is there are a lot of solutions today to manage your public market investments. So you could use something like Charles Schwab, a fidelity account, Robin. Work with any of the major banks. And it's a pretty digital experience where if you look at the flow of what people used to do to manage public market investments, people used to have to handle their physical stock certificates for our Coca-Cola shares and keep track of how many shares they owned and their cost basis.

And do that all manually. So we're living in the world where that manual work is fully true for people who are investing in private market investments today where if you invest in interplays, a VC fund or KKR, private equity fund, or any of the hedge funds or real estate, you're probably managing this information in a spreadsheet that you physically update, and you probably are logging into various portals and interlinks to pull down documents and data from those portals.

We automate all of that kind of. To get the private markets up to the same level of digitization as public markets, as a platform like fidelity. So we'll aggregate client's data, show them a single dashboard that tells them what they own and how their investments are performing, collect their for them and manage other parts of the administrative headache that they used to have to manage.

MPD: I think the first time I saw a stock certificate, it was framed. But back in the day, that was basically currency. You got the stock certificate, it was worth something. It was just a piece of.

Ryan Eisenman: W we'd love to do the same thing with their K ones. Be like, have your children say the first time I saw K and the only time was that it was framed, but right now my tax information just flows directly into my tax return.

MPD: And the folks who out there doing these private market investments in these private equity funds, hedge funds, venture capital funds, they've all got different portals. I'm an active investor. I've got, I don't know, 30, 40 portals. I log into to download one doc. Different logins. They're all a mess.

This is a real administrative nightmare. Real administrators. Is there a part of the solution at arch that is the most popular or the most significant thing that kind of gets people hooked? You talked about ingesting the K one data and K one. Is the tax filing, right? That the company's giving to its investors so that they can flow that information, the tax return or the monthly or quarterly financials.

Is there a particular thing that people gravitate most towards, or is it everyone's just sick of all the paper in general, because it's not paper it's PDF.

Ryan Eisenman: Yeah, I'd say there's three things in particular. And we think of this as a bundled approach where some people care a lot about just understanding what is the total universe of everything that I own.

And I've heard at least three or four dozen times this exact sentence of, if I get hit by a bus, my wife has been spouse wouldn't have any idea of what we own or where to find my investments. So I need a source of truth for that. The second thing is logging into all the portals. So when people get a capital call request or an update letter, we find that a lot of times people won't read the letters.

They will, of course get a capital call cause that's necessary, but they won't do the other things because of the extra admin work to do so we put those little notices back in their inbox. They actually don't even have to log into our platform. We'll give them a direct link to the notice.

And then the third thing really is collecting all of their and other tax sockets. Giving those directly to their accountant. So they don't have to track those down or follow up with missing documents as, so that's probably the one that actually the last one is the most painful and provides the most value.

MPD: Okay. So just to make sure I understand the experience an investor goes in, they set up an arch and they then individually log in to all these different portals. You guys set your T your hooks into those portals and pull out all the documents and then email them to the right people. And I'm assuming maybe start them on the web.

Is that the.

Ryan Eisenman: Very close. So we have a digital way of connecting to all the different portals, like Carta and Intralinks. So when we set up their account, we'll set up all those connections on behalf of the client. Once they sign up for arch then everything that we receive will be posted into the arch bot forum.

So we go from many logins to a single login as there's like single sign-on in a way, all that information is organized within. And then we'll send either a daily or weekly summary email to the client where they, in that one email have everything laid out of these are the capital calls coming due and all the other items that you've received with a directly to the document.

So you can of course go into arch to get that document, but you can also click directly from your email in the same way that you might've before had an attachment to an email. So bringing that old paradigm back. So

MPD: we use Carta as our fund admin for. And I'm familiar with Interline interlinks and all the others, but there seems to be a proliferation dozens of these tiny little HomeStart fund admin platforms out there that probably are the tech behind them does not look very sophisticated.

The product and user experience is not very good. Do they have the necessary APIs for you to hook into, or are you guys limited right now to the big players that have built proper technology binders?

Ryan Eisenman: So even the big players mostly don't have APIs, so we're actually working. Yeah. Carta actually hasn't even released their API.

And so we are working proactively with providers like Carta and some of the other fund admins to build the first of its kind of APIs. And in the meantime, we'll do whatever we need to have different kinds of scraping and different kinds of data extraction in order to get information from all the different platforms and part of the promise to our clients.

And part of the way that we architected this is we need to from day one, be able to pull a hundred percent of the information that clients need. So we work with every portal.

MPD: And do you have a what's the error rate, right? Like when you're scraping information, usually machines tend to make mistakes 1% of the time, some small percentage.

Is that part of the program or have you guys been able to get around.

Ryan Eisenman: Yeah. So we think about this the same way that a Tesla thinks about errors, where using a Tesla, there should be significantly less errors than a human driver. Now they're still errors every now and then. But you can find each air and be like, okay, now we need to identify this as a car, not as a billboard or.

We readjust the algorithm. Part of the way that we keep airs extremely low is we have this proprietary set of data checks, the checks, every piece of information that comes in across the entire platform and anything that is flagged as any kind of anomaly will also be flagged to a human reviewer.

And so we can put human eyes on anything that has any chance of being an air or that flagged by our system to make sure they are.

MPD: That's awesome. Okay. Very cool. So where does this product go in the future? I know you've got this baseline ingesting all of the alternative asset data out there and delivering it to the right people.

Ryan Eisenman: Where do you,

where do you see this running? So there's so much more that is painful for people today in managing their investments and especially everything that touches their private investments. A good example that we hear repeatedly from clients is clients that have 30 to 40 different kinds of funds or institutions that have a lot of funds are constantly calling bankers, submitting wires and completing wire.

And this is something where people are also constantly afraid that they will get the wrong instructions, that they'll have to deal with some kind of fraud that they might send money to someone that is defrauding them. And so we think that there are really good ways to solve those and other kinds of scalable problems that investors deal with.

The subscription product problem is pretty strong. Luckily there are a couple of people solving this from the GP perspective, but we think that there's some need to be able to work with all those super providers. Reporting and reporting data is something that we've been doing a lot more of getting data into platforms like Adipar and black diamond in some of these other reporting systems.

So in that way, being like a cloud for all of this data. And then there are a lot of other use cases, whether it's estate planning or different kinds of financial product access or optimizations around fees or cashflow that we think we'll be able to really help our clients deal with. And then also help them connect to the right service providers in certain ways.

So this can be the basis of a hub for their financial lives.

MPD: Got it. This is a big technical lift, just because you have so many different nodes, you have to plug into here, all right. Customer for this Susan customer for this is that go ahead.

Ryan Eisenman: So at this inner kind of our meeting customer is some version of a private investment firm in that bucket are family offices and fund to funds and others that have dozens to hundreds.

And in some cases, thousands of different. We also work pretty closely with institutional wealth managers. So that could be the independent RIA or multi-family office all the way up to major banks. And so we have a very large us bank that we're working on a pilot with. And then we also work with individuals.

So individuals that have dozens of investments or more that are looking for a single dashboard and looking to automate that work away along with some early work, with a couple pensions and endowments and institutional investors with that.

MPD: It's such an interesting market because I'd imagine a market that's as concentrated as this, the customer acquisition strategies are maybe a little bit different than what you'd see from obviously a direct to consumer product.

How do you guys go out and think about acquiring customers?

Ryan Eisenman: So the biggest channel for us today is direct referrals. So our clients will probably on average, refer us to three people in their network that we can help that either have a similar profile. Or are a different participant in the market.

What we're starting to see a lot more of also is someone who will come in as an individual user of the form that they'll have an investment advisor and accountant that they use. They'll add that advisor accountant as users on their instance of the platform. And then those advisors will start to see the platform.

And then might say, I want to roll this out across our entire advisory. This is something that we just saw happened with another group this last week. So we love those examples because we love when we can have product led growth, where we grow, because our product fits a use case. And because people naturally feel like they can share it and help someone in their network.

The other major channel for us is referrals. So we have programs set up with a couple of the major banks in some other FinTech companies where they bring us into conversations because we unlock value for their clients.

MPD: Very cool. Yeah. I think the virality component of this seems intuitive given that there's all these stakeholders that are all interwoven with each other, someone's accountant ends up serving other people and probably recommends it. Or there are their marketing or sales activities you guys do to support that.

Or you're just focused just on the vitality.

Ryan Eisenman: So there's a little bit more than we want to start doing on the marketing side. Areas is we have some great customers who, and these clients have really interesting experiences. They would love to be able to share with others. And so we're going to start working on ways to partner with our clients on bringing great content to our other clients and really surfacing some of this knowledge out in the world.

As we recently did a webinar with a client that went to school. It was on one of the blue origin flights. And we're going to start putting out a couple articles from that conversation and think that can be the bedrock of a lot of our strategy of creating really differentiated content, things that people want to hear about knowledge.

That's hard to find and being able to lift everyone's ability to learn through some of these conversations.

MPD: So I look at this type of business and I think, wow, this has got to be really hard, just cause you've got so many different players that you have tech dependency on, as someone changes their API, you've got to tweak yours.

You're a software interface with that, right? There's all these different nodes and that's the value, right? You're doing all the hard work for everybody in centralizing that. What has been the biggest challenge for you and creating this business?

Ryan Eisenman: So biggest challenge probably has been getting to the burden of.

What you need to sell into this industry. And so I'd say that took two, two and a half years of the kind of early stage of our company in turn to split our company's trajectory into two parts, it'd be pre-born and approved, then postponed and approved pre what we needed to do is we need to get things like a SOC two.

So an industry standard of you are secure, or you're treating this data in a secure way. You're doing what's needed to make sure that this data, which is really important to clients, stays private and stay secure. That was important along with the right sales collateral, the right visualization within the.

And then I think referenceable clients is extremely important as well. If you're an endowment, who's purchasing art, you want to know that Harvard, Yale, or Stanford is using the platform. And then it's an easy purchasing decision. And the same is true for family offices and multi-family offices. And anyone else you want to know that someone who you consider a, an aspirational peer or someone that you respect or trust uses this platform, and that makes the purchasing decision.

Easier, which is why probably most of our sales motion is driven by referrals and the people that are able to become clients quickly. Once they know, oh, my good friend, mark, he uses arch and I trust him and he's had a great experience.

MPD: How did that affect fundraising for you? Because I think this is one of the newer trends in the venture community.

Historically venture was the asset that entrepreneurs would turn to, to fund that J curve gap. That period, when they were building out a technology before they could really get to market and start generating tons of revenue and crushing and the whole thing but the cost of development has become so cheap that I think that a lot of early stage VCs now don't really want to fund the J curve.

They want to back companies on day one that already generating revenue has some sort of presentable product. The milestones happen much quicker. So every now and then I bumped into these companies that have a normal J curve, a norm, a normal from a decade ago. And they're a little bit lost in the venture cadence.

Did that screw you guys up at all? Or how did that affect you guys?

Ryan Eisenman: Yeah, I think we were lucky to be a little bit conservative at the beginning, so we knew that it might take awhile to get to where this could really start to expand. And so we raised an initial pre-seed round. We had that capital last us for over two and a half, three years.

And we didn't, when we went to our first like real big round of funding, we didn't need to raise it at that time. We still had the ability to continue to operate, but we were an extremely lean team there. We were five people. So the three original founders founded the company to MIT software engineer.

We had one additional engineer and one operations person. And so we could sustainably grow at that pace, but we realized that we had something that should see market and it should expand a lot more quickly. So then we were able to go out and raise a bigger institutional round in order to fuel some of that expense.

MPD: So I had that's I think the lesson is just that you've got to make the first round last longer and have a lot of patients. We have a company. I think that I don't know if the timing is exactly right, but it's at least three, four years, same thing, J curve to get through to where now they have all the data, the proof points.

And they're back on the venture cadence. This is painful for folks, this new expectation around not having a much of a J curve. It's like an L now, as soon as. You just go up. Okay. Now when you guys are building out your algorithm, one of the things we hear a lot of people doing with this kind of thing, where they're trying to make the machines smarter, not make errors.

You mentioned a little bit before is they're balancing the technology with human input. And in some cases Sam less on before he might have been talking about fin or one of the other projects where we, they started out with mainly human and then phase technology. And over time, how did you guys cadence that's sounds like you stayed pretty lean.

So did you just delay going to market until the technology was there? Or did you use humans in a way that maybe it was hidden by this.

Ryan Eisenman: Yeah. So we've been really focused on what the client experience is from day one. And that being one of the most important things for us is what is the end user experience?

Is it beautiful? Does it scale? Does it make their lives significantly better? When we built arch at the very beginning, we were lucky to have two very sophisticated investors and family offices that were our beta clients from day. And we put software in their hands within two to three weeks. And the initial software build was highly manual on the backend.

The actual true tech backend or the 1.0 0 0, 0 was Google sheets and Dropbox. And I was putting information into Google sheets and Dropbox. And then we would query that to the front end, give it to our clients and be like, Hey, how is this? And our first solution was we're going to collect your K one.

We're going to give you and your accountant access to this one page and we'll do all the tracking down of documents. Then we'd make tweaks. We talked to their accountants, we talked to them, we were on the phone with them multiple times a week. Just figuring out like, how does this work? Does this work for you?

What do you, what functionality do you need? Oh, you need to know what's new. Since you last logged in, you need to be able to download. You need to be able to upload. You need to see when things are expected to arrive. And we just very quickly iterated on the product. And that's been our approach since day one.

Iterating with clients making software that is intuitive so that when we talk to. The next family office or multifamily office or RIA, they feel like we are inside their brain and we've built something that they envisioned and that's happened on a number of instances. And then we can always continue to automate more things over time.

But with this idea of, we want to handle a hundred percent of everything that a client would need and then put technology. And so that it is as scalable as possible and as automated. And so both a leader on. But also never losing sight of the most important thing is that great customer experience.

MPD: You have a really developed view of kind of the startup cycle here, the customer development you're doing. How did you get that? It sounds like you're coming out the gate with a tremendous depth in the right way to build these companies.

Ryan Eisenman: I thank you for that. I think it's something that we have just learned along the way.

We probably had four or 5,000 customer conversations at the. In average, somewhere in the six to 10 new customer conversations a day. And so I think that's where we learned the most. Of course we listened to podcasts like yours and try to learn from the smartest people out there who have already done these kinds of things before.

And then we've been lucky to have great investors, advisors, and mentors along the way as well, and surround ourselves by people that we can truly learn from.

MPD: Okay. Right on. All right. Let me begin with. Are you doing admin processing for people's investments? It is not the sexiest thing on earth. Is it important?

What gets you out of bed to solve this problem?

Ryan Eisenman: Yeah. So this is why we think it's important. And when we started this I met my co-founders through this guy, Lee and Lee introduced me to my co-founders being like, Hey, you guys are interested in a similar area. They also want to build something that matters to people, but isn't.

That's an overlooked underloved problem. And probably if you were to survey all the top engineers coming from all the top engineering schools and you ask them, okay, is admin for private investments, one of the top 20 problems that you want to solve? I guess it's not on that list. A strong hell no. And I think that's part of the magic here is that people who built software companies or companies in this space before haven't been able to combine for most of, in most cases.

And there are definitely some notable counter examples here, people haven't been able to combine like really great engineering with customer obsession, with private investments in alternative investments. And we think that there really are like all of these things that are painful for people to solve and things that are huge productivity sucks for people who have a lot of demands on their time and are extremely sophisticated and are really costly and often lead to sub optimal outcomes.

Because when we set out to build this. We were also thinking about this as sometimes you need to start at the end or you need to invert what, you're the way that we're thinking about building this company of what we want to do ultimately is help people have better outcomes. Like we want people to make better financial decisions, to pay less in fees and have better outcomes and be able to protect, preserve and grow capital over time.

We realized in order to do that, you have to have really good data. And in order to have really good data, you have to have great processes. And these processes. So we started with let's automate these processes, then give people good data. And then ultimately that should lead to better

MPD: outcomes. I love that.

I can hear the passion in your voice. It's funny for this topic, but I'm glad someone's doing it. It's important. What's the best part of the journey for you? You've been at this for a bit now. What's what's made this thing.

Ryan Eisenman: I think the best part. The unprompted feedback from our customers when they view the platform for the first time or when they're sharing their experience with us.

And they'll give us this just like amazing bite-size quote of how they love the platform and how it changed their experience and change something about the way that they live or the way that they manage. And we'll try to bring those to our team. We have a team meeting every week and the, one of the biggest portions of our team meeting is going through these kinds of customer quotes and sharing that kind of feedback.

And it is like the fuel that keeps us going of hearing how we're able to help customers with these types of problems.

MPD: I love that. And how'd you get here? Give us a little overview of your background. What was your journey to show up and start doing?

Ryan Eisenman: Yeah. So in college, I studied a bit of like essentially as close to business as you could at a liberal arts school and then studied what my major was as human and organizational development.

So it was a lot around how people interact, how teams are built, how problems are solved and how you create change within organizations. While I was in college in intern for an investment advisor, my dad was also a financial advisor, so got to see this perspective through two different lenses. Saw some of those things that were pretty manual and intensive and unpleasant for a lowly analyst or an intern to do.

So I was doing a lot of that kind of work and then store that in the back of my mind went to go work a consulting job out of school as most people do out of, or maybe not most people, but as a lot of people do out of college, Yep. I was just falling in your path, mark. And then I realized after a summer in Tel-Aviv that there's just a ton happening in the technology sphere.

And that's where I felt like big incremental changes were happening and wanted to be involved in tech. So left the consulting firm went to go work for a startup. Ultimately found myself at Techstars, working for Techstars for a few months in and out of Techstars. We had this idea. Really was validated with that mentor Lee and then with the, my two co-founders, we came to conviction that this is something that we wanted to build and turn into a company and haven't looked back since.

MPD: That's awesome. There's some other parts of the story you left out. We did a little digging on you. Tell us about your wilderness experience.

Ryan Eisenman: Oh, yes. So I think this is one of the first time. Like truly learned how to really plan ahead and how to handle an entire mission from beginning to end.

Because for two years before going to college, I led one of his trips for eight to 15 year old boys at a camp. And these were three to 10 day trips. And I was in some cases just two years older than them at 17. And most of my co-leaders are pretty much all my co-leaders were a fair bit older. So that was probably one of the best experiences for me in terms of like maturity.

And I learned how to cook on these trips. I learned how to plan and how to like what north meant versus south and how to find a trail and how to navigate and also how to manage a team and manage people's happiness. And even if you're caught on the side of the river for two hours, as there's a crazy thunderstorm with eight year old kids who are extremely unhappy and cold, how you.

Bye enjoy those moments. The storytelling that you do to create meaning there and the way that you can take something that could otherwise be a really negative experience and turn it into a growth experience for myself and for everyone else on the truck. It

MPD: was literally just this past week, talking with some folks about the idea of putting our kids in our program for something like this, the idea of getting them out a couple of weeks.

And I was dreaming of something pretty. Where they don't have a lot of resources. It's not glamping, but, resetting what it means to be safe and independent. I think it's a very powerful thing. I was thinking. I would recommend that.

Ryan Eisenman: Yeah, this is a great camp. And then there are programs like NOLs national outdoor leadership school.

I did one of their month long trips where you're fully in the wilderness from. I think those are incredible programs and you get to explore a different side of you and learn skills in a fully different setting.

MPD: Very cool. I'm going to take notes after this conversation.

Okay. And so along the way, it sounds like you've picked up a lot of the startup tips and you have mentors who is coaching you, where did this how'd you figure all this.

Ryan Eisenman: So this initial guy, Lee has been a big coach for us, and he was someone that we met with every week when we were first getting started.

And then as we started. Can I remove the training wheels and be able to work on our own have still continued to keep in touch with. And most recently did a three hour deep dive session into product and product market fit. And some of the things we were doing, and then a lot of our clients have become indoors.

Cause our clients oftentimes are people that are really passionate about managing their investments are, but are also passionate about entrepreneurship and many of them. Done this before and want to see the next generation succeed. And so we're extremely appreciative to the time that they've given us both from a business advice perspective, as well as time focused on product.

And then of course we Le we look to other entrepreneurs. VCs and other people in this industry. And I think it's amazing how people and how willing people are to share time, share perspective, and help us see around corners. Are

MPD: there, are there bits of wisdom that you've taken from mentors or your own personal experience, maybe, what's the most important thing you've learned as a founder may put it that way.

Ryan Eisenman: Yeah. So most important thing we've learned as a founder is just like how much it matters to be obsessed with customers and how much we can learn from all the people around us. And so mentors, aren't the only source of knowledge. It's also our team. And having an incredible and focused and dynamic team is extremely important and having great advisors and friends and being able to read great knowledge and pull knowledge from all these different.

So then for us as founders and as those tryi