4 Challenges for Your Investor Relations Team in the Digital Age

Building healthy relationships with prospective Limited Partners is the only way a firm stays alive. Maintaining those relationships is a lot like advertising a firm to these investors. Your investor relations team wants to put their best foot forward and to make sure they’re seen favorably to the LP without compromising integrity.

Once an LP commits, keeping them engaged in  firm operations is a whole different ball game in terms of marketing. It’s up to the firms to portray their ideas and their results in the best possible light. 

As the world digitizes, investors expect an improved way for their GPs to discuss the important matters of payouts, capital calls, tax information, and investment performance among many other metrics. 

This brings us to the crux of the issue. 

PE firms need to prepare for the future by hedging against these 4 problems: 

  1. Not knowing what metrics are going to keep each investor satisfied. 
  2. Investor’s rapidly changing their minds in terms of what data they want to see from a firm. 
  3. Slow and costly report generation due to manual inputs and lack of data consolidation 
  4. A clean and efficient report, announcement, and notification system 

General Partners need a single source for all of their LP related documents and outreach. 

This brings us squarely to the most optimized solution to GP struggles: an Investor Relations Platform. A dashboard with complex and customizable data visualizations which gets fed directly from the portfolio companies’ accounting data. 

A truly viable solution to your investor relations team issues will not only manage the data visualization and interpretation of a firm’s performance but will actually predict the best metrics to show to an investor given the firm’s performance. Let’s go into how a well developed dashboard solves all 4 issues mentioned above. 

  1. A solid investor relations team dashboard is customizable to the LPs taste. By automating the data visualization process, investors can pick and choose the metrics they want to visualize and how they want it done. Of course, firms want to guide the investors towards metrics that showcase their best achievements. Using predictive analytics, an investor dashboard can pick and choose the initial metrics that LPs see when they log on. They also use Machine Learning to toe the line between what LPs want to see and what presents the firm in the most favorable light. 

  1. Investor’s rapidly changing their mind is an unfortunate problem that can cause panic for the LP. Thus a dashboard needs to be oriented around investor psychology. A proper IR platform will guide the LP towards “stability”. The initial presentation of results to an investor is by far the most important. After years of praying that their money is going in the right direction, nothing is scarier for an investor than the first look at the results. The way a dashboard reduces that fear is that it allows the investor to track the progress of portfolio companies on a more regular basis. Every win along the way is documented and presented to investors. With regular reporting practices, investors have much less to fear. 

  1. Arguably the biggest cost cutting factor a dashboard has is it rids the firm of having to outsource fund admin and IR to an agency. IR agencies are a HUGE cost to the firm’s bottom line.. After receiving the reports, IR agencies tend to take way too long to get back to the firm, often going days with radio silence and when they finally respond to a GP, they’ll often ask for clarification on data or more information on a part of the investment. After they generate very generic and most likely automated reports, they’ll deploy them to LPs without any clue in the world whether these specific LPs will respond positively or negatively. A dashboard cuts the middleman. By integrating portfolio data directly into the dashboard, there’s no need to find minute accounting reports and have a back and forth with an agent. The dashboard simply works better the more you give it and will discern what to use and what not to use without the firm having to clarify.

  1. Finally, LPs today are bombarded with notifications of their investment performance towards the end of the deal cycle. It seems simple and somewhat arbitrary, but maintaining a clean communication system with an LP goes a long way. Every investor wants to know when they will receive returns on their investments but not every investor necessarily wants to know when the tax reporting has been completed for a particular portfolio company. A dashboard is once again the perfect tool with default settings optimized for getting the most amount of data out in the least possible amount of documentation. Furthermore, if LPs have preferences on what events they want to be notified of and when, they can choose to be notified of these events. 

At the end of the day, the biggest thing firms need to communicate to LPs is that they are trustworthy. There is no better way to do so other than letting LPs have (or at least think they have) a complete view of the inner workings of their investments.

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.

investor relations team