Automating the Arcane: Maybern Tackles the $15 Trillion Accounting Quagmire of Private Capital
The private capital market, a colossal $15 trillion behemoth encompassing private equity, private credit, venture capital, and real estate, grapples with a pervasive and complex accounting challenge. Bespoke deals between investment firms and their high-net-worth clients necessitate intricate, customized calculations to determine management fees and profit distribution. This intricate web of agreements has traditionally relied on an unlikely tool: Microsoft Excel. Despite the market’s immense size and sophistication, the industry standard for managing these critical calculations remains surprisingly rudimentary, leading to inefficiencies, errors, and potential regulatory risks.
Ross Mechanic, CEO of the New York-based fintech startup Maybern, recognized this systemic inefficiency. His experience as a software engineer at Cadre, a platform for real estate investments, exposed him firsthand to the laborious and error-prone nature of manual calculations. Witnessing a five-person team constantly wrestling with spreadsheets and uncovering quarterly errors in a $1.5 billion portfolio, Mechanic saw an opportunity for technological disruption. He realized that even the largest private equity firms relied heavily on Excel, a tool ill-equipped to handle the complexity and scale of private capital accounting. This sparked the genesis of Maybern, a company dedicated to automating these complex calculations and ushering the private capital industry into a new era of accuracy and efficiency.
Maybern’s software offers a much-needed solution to this widespread problem. It automates the calculation of management fees, capital calls, and profit distributions (known as waterfall calculations), providing a more controlled and transparent environment than Excel. This automation not only saves countless hours of manual labor but also significantly reduces the risk of errors. The platform tracks changes made by different users, enhancing quality control and accountability, and addresses the growing concern of accountant shortages plaguing the industry. With $26 million in funding secured, including a recent $14 million round led by Primary Ventures, Maybern is poised to transform how private capital firms manage their intricate financial operations. This investment underscores the growing demand for specialized software in a market desperate for modernization.
The private capital market’s rapid expansion, nearly doubling in size over the past five years, has further exacerbated the need for robust technological solutions. Existing software tools have failed to keep pace, lagging behind the industry’s growth and complexity. This technological deficit, coupled with a severe shortage of qualified accountants, has created a perfect storm, amplifying the need for a solution like Maybern. The reliance on manual processes, particularly within Excel, poses significant risks, including calculation errors, compliance breaches, and operational inefficiencies. The Securities and Exchange Commission (SEC) has taken notice, penalizing firms for inaccuracies in fee calculations, further highlighting the need for greater transparency and accuracy in private capital accounting.
Implementing Maybern’s software requires a significant upfront investment of time and effort. The process involves meticulously transferring investment contracts, complex legal documents outlining the specific terms of each deal, and existing Excel data into the platform. This data migration, while time-consuming, is crucial for ensuring the accuracy and reliability of future calculations. Gauge Capital, a $3.5 billion private equity fund, embarked on this transition, anticipating significant time savings once the system is fully operational. They foresee a reduction of approximately three days of work per capital call and one day per quarter for management fee calculations. This efficiency gain allows their accounting staff to focus on higher-level analysis and strategic decision-making, rather than being bogged down by tedious manual tasks.
Maybern’s value proposition lies in its ability to handle the nuanced and often unique agreements between investment firms and their investors. Each investor may have negotiated different management fee structures and participation levels in credit lines, requiring bespoke calculations for every transaction. These complexities are further amplified by regulatory requirements, mandating strict adherence to the terms outlined in the investment contracts. Manually managing these intricacies is a Herculean task, prone to errors and inefficiencies. Maybern’s software streamlines this process, automating the calculations and ensuring compliance with contractual obligations and regulatory standards, mitigating the risk of costly errors and potential legal repercussions.
Looking ahead, Maybern envisions expanding beyond basic accounting automation to provide more sophisticated analytical tools. The company aims to empower investment firms with scenario planning capabilities, enabling them to model the financial impact of various investment decisions, such as the optimal timing for asset sales. This strategic focus signifies Maybern’s ambition to become an indispensable partner for private capital firms, not merely a software provider. By offering advanced analytics and decision-making support, Maybern aims to solidify its position as a leader in the evolving landscape of private capital technology. However, navigating this complex terrain requires a delicate balancing act. Maybern must resist the temptation to cater to every specific client request, which could lead to a resource-intensive consulting model and dilute its focus on developing scalable solutions. The company’s success hinges on its ability to identify and address the most common challenges faced by investment firms while remaining agile and responsive to the evolving needs of the market.
