Q&A with Andrew Pignanelli of Velvet

The biggest issues for allocators right now involve sourcing and evaluating managers.

Allocators spend huge amounts of time evaluating hundreds of managers each year. The process hasn't changed in 30 years. Decks are shared and reviewed then a series of meetings takes place.

Velvet's approach is to streamline this process using a marketplace of managers and allocators. Using Velvet's marketplace, allocators can review dozens of funds at the same time, have access to in-depth diligence reports, and can review unique fund analytics. By saving time on discovery, evaluation, and investment, allocators can save 80% of the time it takes to make an investment decision on a fund.

Allocators make their own decisions to invest, but Velvet provides as much data as possible to allow them to best make these decisions. We collect basic information on a fund, such as documents, terms, and investment specifics. We also collect highest-resolution returns data on both venture and hedge funds - which allows investors to see a full picture of the fund's track record before even meeting the manager. Since we collect all of this data at scale, we're using it to train machine learning models and develop advanced analytics so LPs can make more informed decisions.

The most important trend is the growth of the cryptocurrency funds market. Velvet is now the world's largest source of private cryptocurrency funds, and we're helping allocator institutions access these funds easily.

There's a large ongoing shift from institutions moving into cryptocurrency, and more specifically cryptocurrency funds. According to PWC, crypto hedge fund assets are growing 90% per year and outperforming traditional asset classes, which has piqued interest from large institutions like Franklin Templeton and Bridgewater.

The recent market shift has also increased the appetite for hedged and market neutral assets, which private funds serve well. According to Barclays, 35% of allocators are increasing their exposure to hedge funds in 2022 while 41% are increasing their allocation to PE/VC. Velvet is creating the standard for private funds, and we're going to be the sourcing engine for this large shift in allocations.