PE veterans launch TopQ

TopQ Software, a technology company founded by former private equity investors, has launched on TopQ is a tool for the secure exchange and analysis of track record data between private equity fund managers and institutional investors.


TopQ Software Ltd. (TopQ), a technology company founded by former private equity investors, today announces its launch on TopQ is a revolutionary tool for the secure exchange and analysis of track record data between private equity fund managers and institutional investors.

TopQ contains an array of proprietary technology, which will change the way private equity track record data is analyzed. These include: an “intelligent import” capability, which means the platform can interpret track record data from a variety of spreadsheet formats; “dynamic filtering” which allows track record data to be filtered by geography, industry, individual team member etc, at the touch of a button; and a range of customizable charts and configurable tools, designed specifically to illustrate aspects of private equity fund performance, which can be arranged within TopQ’s “widget framework”.TopQ allows private equity fund managers to upload their fund performance data securely and quickly, and share their data with invited institutional investors. Using TopQ, investors can then analyze the data with levels of accuracy, speed and data visualization that have until now been unavailable in the private equity industry.
TopQ has locations in Edinburgh, London and Boston. The company was founded in 2013 by Graeme Faulds and Graham Paterson, both founding partners of SL Capital Partners, one of the world’s leading private equity fund of funds, and Drake Paulson, a veteran of the private equity software industry.
Private equity fund managers raise capital from institutional investors through a marketing process that can take anywhere between a few months and two years. In order to do this, they need to communicate complex and confidential performance track record data with prospective institutional investors. Until now, this has been done almost exclusively using spreadsheets, a practice which has a number of drawbacks.
“It was always unbelievable to us that we were working in a $3 trillion industry still predominantly run on spreadsheets,” said Graeme Faulds, co-founder of TopQ. “This has always made track record analysis a painstaking and long-winded process for both fund managers and investors.
“The use of spreadsheets for this task is prone to user error and is open to abuse,” continued Faulds. “For example, this data is confidential, but a confidential spreadsheet containing track record data can easily be passed on to a third party.”
TopQ’s sharing function means that track records are viewed only by their intended recipients and all the key data is encrypted using the latest 256bit AES technology. The system also provides an audit trail of who has worked on a track record and when.
Equally important as the speed, flexibility and security that comes with using TopQ, is the increased transparency. By simplifying the creation and distribution of performance data, TopQ creates a new level of transparency between fund managers and investors.
“Experienced investors in private equity will be familiar with the conundrum that every fund manager claims to be a top quartile performer,” saidGraham Paterson, co-founder of TopQ. “Even the worst performers can manage to dig up one particular metric which puts their fund in the top quartile, which means as an investor you end up having to cut through a lot of layers of data before you can perform an apples-to-apples comparison. One of the driving forces behind the establishment of TopQ was the need to give investors peace of mind when conducting their due diligence.”
Inaccuracy at a granular level
When communicating their track record data, fund managers will in many cases consolidate a fund’s cash flow data into monthly – rather than daily – figures. This is because a spreadsheet with years of daily cash flow records quickly becomes unwieldy.
Analysis by TopQ* shows that by doing this, a manager could potentially be misstating a fund’s internal rate of return (IRR) by a variation of as much as 10 percent. That is to say, a fund stating an overall IRR of 20 percent, could in theory have returned just 18 percent or even 22 percent. Where cash flows are consolidated into quarterly or even annual figures, this inaccuracy is exacerbated. TopQ has been designed to work with both daily cash flows or monthly.
Technology and pricing
TopQ is a Software as a Service (‘SaaS’) based platform and is a cloud-hosted application, hence requires no plug-ins, downloads or installations. It is designed to work on all major browsers.
The product is distributed on a “freemium” model, whereby users can register to use the “TopQ Reader” for free, which allows them to view track records, which have been shared with them, and perform standard analysis. Users who subscribe to the “TopQ Analyzer” product are able to upload and share track records and take advantage of customizable analysis and flexible reporting options. All of this is available
About TopQ
TopQ Software Ltd. is a UK-headquartered private equity software company with locations in Boston, Edinburgh and London. TopQ was founded in 2013 by Graeme Faulds, Graham Paterson and Drake Paulson. TopQ provides fund managers and investors with an easy to use, reliable and standardized approach to track record analysis.
TopQ Software Ltd.’s head office is at 6 Wemyss Place, Edinburgh, EH3 6DH.
* The internal rate of return (IRR) is calculated using a combination of the length of time that cash was invested in a deal and the absolute money returned by the deal. A short length of time invested, combined with a large amount of cash returned, gives a high IRR. A longer period of time invested, combined with a smaller amount of cash returned, would gives a lower IRR.
A significant number of private equity fund managers, when reporting their fund cash flows (cash in and cash out of their portfolio companies), consolidate daily cash flow figures into more easily reportable monthly figures. This introduces a margin of inaccuracy into their reports of how long cash was invested in a portfolio company. This has a potential knock-on effect on the IRR calculations. TopQ’s analysis reveals that, in theory, a consolidation of daily cash flows into monthly could distort IRR figures by a variation of as much as 10 percent (ie, an IRR of 20 percent could in reality be between 18 and 22 percent).
BackBay Communications
Toby Mitchenall, +44 203 475 7553
Philip Nunes, +1-617-556-9982 x227