3 Reasons Private Equity Partners Choose Colorado

Colorado is becoming a private equity partner favorite

Colorado isn’t just hot for tech startups and energy development. It’s also quickly becoming perhaps the best-kept secret in private equity today. The Centennial State boasts a business-friendly environment and is home to one of the top-rated talent pools in the country. Many come for the beauty and adventure and stay for economic opportunities. And, more often, they’re doing it the other way around as well.

There are a variety of reasons why partners may choose to live and/or do business in Colorado. For many, the three main reasons are due to the state’s business friendliness and, by extension, flourishing economy, it’s highly skilled workforce, and the lifestyle advantages of living here.

  1. Business in Colorado.

Colorado’s economy is ranked first in the U.S. With a friendly business environment, steady growth, and low unemployment, it’s been easy for investors to see Colorado as an excellent opportunity. Forbes ranked Colorado as the eighth-best state for doing business, where companies have access to the country’s second most educated population. The magazine also ranks Colorado at number seven for growth prospects.

  1. Highly Skilled Workforce.

As previously mentioned, Colorado is home to the country’s second most educated workforce. Forbes notes that 41% of Colorado’s adult population has a college education. And the population of adults aged 25 – 34 is the second-highest in the country.

When considering where to invest (and/or where to move yourself!?), areas with a highly trained and skilled labor force offer some of the best opportunities for growth. The “brain concentration” of these types of places tend to create a sort of multiplier effect of ideas and innovation, often propelling growth even further.

  1. Lifestyle Advantages.

Among the variety of reasons, Colorado offers such a skilled and diverse workforce is due to the lifestyle advantages provided in the state. Colorado has experienced tremendous population growth over the past decade, and lifestyle has a lot to do with it. Young professionals specifically are flocking to Colorado to take in the state’s active, outdoor lifestyle. Additional lifestyle benefits include easy access to one of the country’s top-rated international airports, and an abundant arts, music, and food culture.

Colorado: An Emerging Who’s Who In Private Equity?

Some well known private equity firms call Colorado home to take advantage of these benefits and more. Partners Group, a firm based out of Switzerland, had announced it will open a second headquarters in Broomfield late 2019. Others include Black Lake Capital, Lion Equity Partners, and The Decatur Group to name a few.

A rendering of the headquarters under construction by Partners Group in Broomfield, Colorado.

At the same time, PE investment in Colorado businesses continues to be strong. Real estate investment is a favorite for many firms, but all manner of industries are represented. Colorado’s diverse economy provides ample investment opportunities for firms focused on professional services, technology, and energy development markets.

Colorado hasn’t received the investment attention of traditional hotbeds such as Silicon Valley and Boston. But, the state’s burgeoning popularity means that now is a great time to take a look at Colorado investment. The state’s business friendliness, skilled workforce, and booming economy make it a great place for business investment.

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A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like Salesforce.com have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that Salesforce.com has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that Salesforce.com — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.

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