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.

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.