5 outsourcing myths: what VCs get wrong about modern fund administration
For many venture capital (VC) firms, the word 'outsourcing' conjures up images of impersonal services, rigid contracts, or a loss of control. But Abbie Hewlett, Executive Director at HFL, wants to change that perception.
Drawing on her 15+ years at KPMG and four years helping to drive innovation at HFL – a boutique, family-owned fund administration firm – Abbie is keen to tackle the misconceptions that hold VCs back from realising the value of outsourcing.
She sees five key myths standing in the way of effective conversations around outsourced fund administration, and at a recent Bound x HFL VC Breakfast event, she took some time out to help bust those misconceptions.
Myth 1: Outsourcing means losing control
One of the most pervasive myths about outsourcing is that it somehow creates an ‘us’ and ‘them’ divide between the VC team and their fund administrators. Abbie believes this couldn’t be further from the truth.
“We’re not just delivering services, we’re embedding ourselves as part of the team,” she explains. “We work to fit their way of operating, whether that’s through Slack, WhatsApp, or highly customised reporting. We’re not bound by one-size-fits-all processes.”
HFL’s emphasis on collaboration means outsourcing doesn’t feel like handing off tasks to a third party. Instead, it helps VCs free themselves from operational distractions. “We remove the friction caused by day-to-day admin tasks – such as bookkeeping or investor onboarding – so that our clients can focus on what actually drives their success, like strengthening LP relationships or sourcing deals.”
The collaborative approach brings additional benefits, too. “We learn a lot from working across our different clients,” Abbie shares. “The value-add that you can bring from having that insight is priceless as it enables you to share best practices or learnings from other VCs.”
Myth 2: Outsourcing is all or nothing
Another common misconception is that outsourcing means handing over every aspect of fund operations to an external partner. Abbie points out that this isn’t necessary.
“Outsourcing can be tailored. For instance, even if your fund is domiciled in the UK, rather than in Guernsey, where HFL is headquartered, we can still provide specific services bookkeeping, accounting and assistance in investor CDD collation. It’s about delivering what clients need, not insisting they take on the whole suite,” she explains.
This modular approach enables VCs to offload pain points without disrupting their existing workflows.
Myth 3: Outsourcing is too expensive
The fear of high costs also often prevents VCs from considering outsourcing. Abbie identifies this as a critical misconception that needs addressing.
“Something that surprises a lot of first-time managers is around formation costs,” she explains. “A lot of people think that that’s a cost to them, and actually it’s not, it’s a fund expense. It’s all sorted on the first close of the fund, and the VC isn't having to fund all of that themselves upfront.”
Understanding this distinction is vital for emerging funds. “Once clients see that formation costs are managed at the fund level, it takes the weight off their shoulders and makes outsourcing a much more accessible and cost-effective option,” says Abbie.
The cost consideration becomes particularly relevant when weighing it against the operational burden of managing everything internally. As Abbie points out, removing these administrative tasks allows VCs to focus on activities that actually drive their success, like strengthening LP relationships or sourcing deals. For many firms, the efficiency gains and freed-up bandwidth can more than justify the investment.
Myth 4: AI and automation will replace human expertise
Another common myth (one that is growing in popularity as tech evolves) is that automation and AI will eventually replace human expertise in fund administration. Abbie, however, views technology as a tool that complements, rather than competes with, human skills.
“AI is an asset. It allows us to provide faster and more accurate services, like real-time reporting or automated reconciliations,” she explains. “But it’s not a substitute for understanding a client’s unique needs or offering nuanced insights.”
At HFL, this approach is supported by a dedicated Head of Strategic Technology and Innovation. “Their role is to explore the best tools, not the flashiest ones, and ensure we’re integrating tech in ways that deliver real value. It’s about combining efficiency with human oversight to deliver the best outcomes for our clients,” she notes.
And crucially, HFL’s approach to tech innovation is extremely pragmatic: “It’s okay to fail fast. If you find something you think is good, but it doesn't work out after a few weeks, that's fine – move on to the next thing. That’s how we consistently deliver innovative services to VCs.”
Myth 5: Keeping everything in-house is safer
For Abbie, the biggest misconception isn’t about outsourcing itself, it’s the fear of making a change at all.
“The pace of evolution in the VC world is relentless – whether it’s regulatory shifts, investor demands, or emerging technologies,” she explains. “Trying to manage everything internally can lead to inefficiencies that ultimately hold firms back.”
By partnering with a fund administrator that specialises in VCs, funds can free up bandwidth and gain access to expertise that would otherwise be out of reach. “It’s not about relinquishing control. It’s about equipping yourself with the right tools and people to adapt and thrive in a fast-changing environment. And if you’re not embracing change, you’re going to be left behind,” she warns.
The key question
It’s clear that fund administration has evolved beyond a simple lift and shift of services to an external provider. As Abbie’s insights reveal, it’s now about finding a partner who can adapt to your working style, bring valuable expertise, and help navigate an increasingly complex landscape – while maintaining the agility that VC firms need.
“Modern outsourcing is less about offloading work and more about creating partnerships that enable growth. It also goes beyond efficiency to building trust and designing systems that support long-term success – for the VC, their investors, and their portfolio companies," she explains.
And in an industry that values agility and innovation, Abbie believes the key question isn’t ‘why outsource?’ – but ‘why wouldn’t you outsource?’
Practical guidance for VCs considering outsourcing fund administration
For VCs evaluating whether outsourcing is right for them, Abbie offers some practical guidance:
Be clear about your needs: Identify the operational challenges you want to address. Whether it’s improving reporting or freeing up time, clarity is key to finding the right partner.
Match communication styles: Look for a provider who works the way you do. Whether you prefer immediate Slack or WhatsApp messages or traditional email chains, alignment here will make collaboration seamless.
Understand the costs: Don’t let assumptions about expenses deter you. Ask detailed questions about how fees are structured and where they’re covered to avoid surprises.
Leverage their expertise: The right partner doesn’t just execute tasks, they bring insights and best practices from working with other funds. Use this to refine your own strategy.
