Sitting beneath the $15 trillion that global investors have sunk into private capital, a burgeoning pool of investments that covers everything from private equity and private credit to venture capital and real estate funds, is a mind-numbing accounting problem. Investment firms make countless bespoke deals with their deep-pocketed clients, creating the need for highly complex, custom calculations to figure out the investment firms’ management fees and who will reap what share of the profits.
“It doesn’t matter if you manage $50 million or $250 billion across venture capital, real estate or private equity. All of this is managed in Excel,” says Ross Mechanic, the 30-year-old cofounder and CEO of fintech company Maybern. His three-year-old, 32-person New York startup uses software to automate the gnarly calculations, aiming to save accounting teams time, improve their accuracy and help them produce reports faster. Mechanic also plans to expand beyond accounting to help private equity firms make strategic decisions on when they should sell an asset.
In May 2024, Maybern raised $14 million in funding led by Primary Ventures at an $80 million valuation. It has raised $26 million since its 2021 start.
There’s a growing need for software serving this space. The private capital market has nearly doubled in size over the past five years, but the technical infrastructure supporting it hasn’t kept up. “Software tools exist for them, but they’re monumentally behind,” says Emily Man, a partner at Primary Ventures who led the firm’s recent Maybern investment. And a severe shortage of accountants has made the problem much worse.
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Ross Mechanic, whose father Jon Mechanic is a prominent real estate lawyer in New York, was working at fintech company Cadre in 2020 when he stumbled on the thorny accounting issues in private capital. As a software engineer at the startup, which helps affluent Americans invest in commercial real estate, he saw how the industry handled management-fee calculations and capital calls, where a fund asks investors to pony up the money they’ve already committed to investing.
“We had a five-person team checking those numbers, and we were finding errors every quarter. It was insane to me, especially as an engineer, that we had a billion and a half under management and it was all happening in Excel.” Today, Mechanic estimates that 95% of these calculations are still done in Excel, even at the largest private equity funds.
He founded Maybern in mid-2021 with former Cadre chief technology officer Ashwin Raghu, and they took two and a half years to build the software and start selling it. The product automates the calculations for the management fees an investment fund collects, the capital calls they make and the profits earned by the fund managers and the investors (also known as waterfall calculations).
As a calculation tool, Excel is extremely flexible, but when multiple people work in the same large spreadsheets, it’s nearly impossible to track who has made what changes, and when. Maybern’s software is a more controlled environment that tracks those changes and tries to introduce better quality control. The startup’s target customer is an investment fund with $2 billion to $20 billion in assets under management, and its typical end-user is a fund’s controller or chief financial officer.
Gauge Capital, a private equity fund with $3.5 billion in assets based in Southlake, Texas, started getting set up in Maybern’s software in May. Gauge has hundreds of investors including wealthy individuals, pension funds and college endowments, many of which have negotiated different deals with Gauge for the management fees they pay. Some investors also choose not to participate in the line of credit Gauge uses to fund some of its bets, which means those investors don’t have to help pay the interest expenses associated with it.
These differences mean each investor needs a unique calculation of management fees and payouts, and each capital call must be run differently. The negotiated investment contracts “are huge legal documents that are nuanced and different for every fund, and you have to follow those to a tee because that’s what the investors signed up for. That is also what the SEC would hold us accountable to,” says Megan Clarke, vice president and assistant chief compliance officer at Gauge.
Calculation errors can be costly. Last year, the SEC accused the large private equity firm Insight Partners of charging too much in management fees “by inaccurately calculating management fees based on aggregated invested capital at the portfolio company level instead of at the individual portfolio investment security level, as required by the applicable limited partnership agreements.” The SEC also said Insight failed to disclose “a conflict of interest to investors relating to its fee calculations.” The charges resulted in a $1.5 million fine for Insight.
For investment firms, getting started with Maybern is a time-intensive process. Gauge started sending its investment contracts and Excel files to the startup in July 2024, and Clarke thinks she’ll finally be able to use the software to run calculations for the first quarter of 2025. She expects Maybern will save her accounting staff about three days’ worth of work for each capital call (they have about six capital calls a year). Clarke also thinks Maybern will save one day of work quarterly for one of her analysts to calculate management fees.
“We have so much experience, we don’t need to be spending hours rolling files and trying to merge capital calls and distributions,” says Kandace Lang, fund controller at Gauge. “We really need to be doing higher level-analysis. That’s what Maybern can offer–these efficiencies that will take us out of the weeds.”
Maybern’s business model is to charge one to two basis points (0.01% to 0.02%) in fees for every $1 of assets that customers manage through its software. It has seven customers and about $17 billion in assets on its platform, implying annualized revenue of about $2 to $3 million. In addition to Gauge, Madison Realty Capital, a real estate-focused private equity and private credit firm with $21 billion in assets, also uses Maybern.
Once firms have their data set up in Maybern and have automated accounting calculations, Mechanic wants to help them run more advanced analyses and make projections for different scenarios, such as what would happen to investor returns and cash holdings if a private equity firm sold an asset today versus holding it for two years. “That’s where I see us going over time–from creating this automation layer that creates data governance, control and efficiency to more strategic decision-making for these funds.”
Maybern has some daunting challenges in its path. First, it’s operating in a new category that funds haven’t historically bought software in, which will require a lot of legwork and education from the startup’s sales team. Companies like Yardi and FIS Private Capital (formerly Investran) have provided general ledger software for years, and other businesses like Juniper Square are well established in end-to-end fund accounting. But most companies have stopped short of running the painful calculations Maybern is specializing in, often requiring customers to do them on their own and upload them in Excel sheets.
The complexity Maybern has plunged into creates another challenge–it must resist the temptation to do every little thing customers ask for, since that could cause it to morph into a labor-intensive consulting firm. “These funds have a ton of edge cases,” Mechanic says. “Finding the balance between handling those complexities while not building bespoke custom software is always the hardest part of this.”
He tries to strike the balance by staying close to the market to understand the most pressing needs across many investment firms. “We need to make sure that, rather than solving an individual client’s current problem, we’re building functionality that also solves other pieces,” he says. “We also need to know when to say, ‘No, this is totally off-market and something you’re going to have to do out of the system.’”