4 Steps to an Effective Private Equity Data Management Strategy

In this blog, we’ll discuss how to formulate an effective strategy for efficiently managing and accessing your private equity data.

Data is only as valuable as it is accessible and understandable. Without an effective way to manage information, it can very quickly become “noise.” And in some ways, that’s worse than not having the data at all, since it can hide valuable insights that you might otherwise have discovered.

To get the most out of your private equity data, take these four steps:

Step 1: Focus on Private Equity data problems you need to solve.

Start by looking at your organization’s business goals in order to identify what’s working and what needs improvement. And try to view things as an outsider would. It’s common—and probably the default mindset—to see the way things are as the way they should be, even if that’s not the case. 

To clearly identify any gaps that should be addressed by a more effective private equity data management strategy, ask yourself:

  • Which part(s) of our operations would be best served by more effective data capabilities?
  • Who are the stakeholders who stand to benefit from a data strategy? How do they benefit? Why is the strategy beneficial?
  • Where are there problems in our ability to generate and capture all the data we need?
  • Which processes could be streamlined or better informed by data?
  • What data would we like to have but currently don’t?
  • Where could technology be used to facilitate internal processes that may be generating data that isn’t currently captured?
  • Where and how do we currently store data?
  • How usable is our data in its current format?
  • Who do we depend upon to make our data usable?

Step 2: Understand your workflows.

Once you have a better feel for what you are trying to accomplish, consider where potential problems may occur and how best to address them. Where do your processes break down? 

Here again, if your inclination is to say, “I think we’re good,” your perspective may not be entirely bias-free. It’s very rare to find an organization whose processes simply can’t be improved. There are always ways to streamline workflows, and in some cases, a major overhaul may be called for.

Looking at your current workflow, evaluate how you:

  1. Access and/or connect to data
  2. Prepare data to be properly analyzed
  3. Perform analyses on and/or consume data

It’s important that you not take any shortcuts here. You’ve got to be sure you can trace the path that data follows from the moment it’s received or generated to the point where it’s been used as appropriate and is now stored for potential future uses. This has to include every stop or operation along the way.

Step 3: Dip your toe into Private Equity Data analytics.

Chances are, your current process is cumbersome and relies on manual input into disconnected systems. Raise your hand if your analysts are relying heavily on Excel spreadsheets? And raise it again if you consistently see #REF!

Today’s analytics solutions make it possible for business users with no technical skills to perform complex private equity data analyses in real-time and very intuitively. This saves you and your organization valuable time and resources.

With tools that allow you to access, prepare, and consume data more easily, analysts can make more efficient use of their time and talents—offering more strategic value to your firm and helping you differentiate from the competition.

Step 4: Get ready to demo private equity technology.

Now that you have a better idea of the benefits that more effectively managed data can provide your organization and what you are looking for in a solution, it’s time to explore what’s available in the marketplace. 

There are solutions that bring together data from disparate sources in one place, then model the combined information to establish a “single source of truth” for all of the data across all of the systems. Even better, the right solution can connect to the data systems already in place, with no need to export or upload information, simplifying the process. In that way, everyone on your team has access to the same relevant, up-to-date information, anytime and from anywhere.

Solutions that allow you to connect and use multiple databases provide the best of both worlds: flexibility and customization. Effective use of data, coupled with a technology solution that is specialized for private equity firms, can help organizations significantly improve their use of time and resources, increasing efficiency and simplifying processes. 

Altvia has developed a data and technology platform specifically for the needs of private equity firms:

The base of a modern technology platform is built on a single source of truth that supports key workflows, contact management, relationship mapping, and the automation of key activities (ie. emails and task assignments)

The intelligence layer connects, normalizes, and displays data across sources (ie CRM, Accounting, 3rd Party) to drive speed to insight.

Distribute personalized content like PPMs, K1s, and Capital calls with ease and enhance the investor experience with a secure portal underpinned by data-rich analytics.

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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