3 Ways to Gain Data-Driven Insight for Private Equity Firms

You’d think with all of the capital involved, that private equity firms would embrace technology with open arms, but the opposite is true—PE firms are notoriously slow and resistant to adopt new technologies. 

The industry has been traditionally reliant on spreadsheets and intuition. These methods miss the mark on data-driven insights that help the firm identify opportunities, build relationships, and strategically invest. 

Fund managers needed a big shakeup and a perspective shift to see the advantages of adopting new technology. The pandemic was that shakeup. 

The firms who started their digital journeys pre-pandemic were able to leverage the latest tools to minimize disruptions, react quicker to shifting issues, and monitor the impact of the pandemic on portfolio health.

Firms that were behind the curve with technology felt the blow of the pandemic much more dramatically. Many were left scrambling to sift through spreadsheets and emails to try and make sense of the pandemic’s impact on their portfolios. With the move to remote work, reaction time slowed, there were more disruptions, and the inefficiencies caused stress and loss of trust.

It’s now more apparent than ever what an advantage it is to use centralized systems and data to manage operations and drive insights for PE firms. The use of data-driven insights for PE firms is a clear competitive advantage. Instead of leading by intuition, firms using data to drive their decisions have more trust from their investors and make better investments. 

How can firms make this shift to data-driven and get better insights? In this article, we’ll review three different ways to use data to drive business decisions.

Take advantage of your proprietary data

Every PE firm has massive amounts of historical information. The answer to the most pressing questions lay within that information if you have the proper technology to identify insights efficiently. Comparing massive spreadsheets and pulling data from multiple sources can lead to mistakes and false conclusions, let alone, it’s an enormous waste of time. 

Modern firms with smart technology tools should be able to look at their data and quickly answer questions like the ones below:

  • Who are my top capital raisers?
  • What regions are we most successful in?
  • Where are our best introductions coming from?
  • Where can we improve deal progression and optimize performance?
  • What are the characteristics of our most committed LPs?

By answering these questions, firms can identify top priorities and ensure they are efficiently spending their time on tasks that are more likely to provide high returns instead of sifting through spreadsheets. At a minimum, technology can be used to create firm-wide visibility, better-coordinate teams, and avoid frustrations chasing data across applications.

Use third-party data

To make their data even more powerful, PE firms can take their collected data and combine it with third-party data tools, like Pitchbook, DataFox, and Source Scrub. Combining data in one tool, like your CRM, gives firms a complete picture of portfolio’s performance in relation to the marketplace as a whole. 

With industry benchmarks and internal data combined, it’s more straightforward to determine which factors accelerate or derail a deal right from the start. Firms can hone in on great opportunities earlier and use their resources to act faster. They can also identify red flags and avoid situations where they are likely to lose time and money.

You can learn a lot about your company by analyzing internal data, but by combining it with industry knowledge and stats, firms can spot both advantages and areas of weakness. There are untapped opportunities or warning signs of future collapse that could go unseen without the proper technology and information.

Create a single source of truth for private equity firms

With the right tools, a firm can visualize the proprietary data housed in their system of record, enriched with 3rd party data sets, and further enhance the data with portfolio and fund performance visualizations.

Altvia is a tool that can combine internal data with 3rd party data to create visualizations that empower firms to see trends quickly. The aggregated data feeds business intelligence, which turns spreadsheets into interactive data visualizations that accelerate the viewer’s comprehension to provide real-time insight to identify trends and abnormalities quickly.

Visualizations shared with firm team members contribute to faster analysis and a more efficient process. They can give firms an edge over the competition and quickly communicate their value and expertise. 

To take it a step further, tools like Altvia allow investors to enter a web-based, consumer-like portal. This portal surfaces investor-appropriate data visualizations and provides real-time transparency into their investment. With this type of portal, investors can get relevant data instantly and slice and dice charts and graphs as they please. 

Uncover data-driven insights and gain a competitive edge for private equity firms

Your firm already has mountains of data. Now it just needs the right technology to make sense of it and add in market data to draw powerful data-driven insights and dynamic visualizations. 

If you’d like to give your firm a competitive edge with the ability to identify issues before they arise and laser focus on the very best opportunities, give Altvia a try and sign up for a free demo.

Private Equity Firms