5 KPIs Your Private Equity Firm Should Monitor

The Private Equity/Venture Capital industry is numbers-driven, and, while cash flow is important, firms looking to level up their growth need to set goals that go beyond the simple metrics of money-in/money-out. To measure progress and success, firms need to track those goals against Key Performance Metrics (KPIs). 

The KPIs you set will become the firm’s “north star”—the backbone of how you strategize growth, and how you think about the core mission and future of the company. But which KPIs should PE/VCs be focused on, and how can you best monitor and report on those metrics to add value for investors? Read on as we help weed through the noise and determine the top 5 KPIs your firm should be tracking. 

5 KPIs Your Firm Should be Monitoring 

  1. Time Spent Sourcing

    Time is one of your firm’s most valuable assets (time is money, after all). The on-the-clock time your team puts into researching and sourcing deals and opportunities is a critical component of the firm’s scalability.

    Because payroll is the major fixed expense of any deal sourcing, tracking time spent sourcing arms your firm with a full understanding of deal sourcing costs and unveils process inefficiencies so you can adjust for the better.

  2. Number of Quality Deals (and their sources)

    Along with how long it took to secure you a deal, you’ve likely heard the question “Where did this deal come from?” once you’ve closed it. If your firm isn’t tracking 1, the overall number of quality deals (ie: those that have converted through your funnel), and 2, the source of said quality deals, you could be losing out on the ability to hone in on a quality lead source to replicate for future deal sourcing.

    By tracking the source for every deal—quality or not—your firm can better understand the deal sources to allocate more time to, and those that are not bringing any value.

  3. Frequency and Touch Points

    The process in closing a deal differs from firm to firm, but regardless, your team needs to check-in and communicate to nurture that lead from an opportunity to a secured deal. That’s where measuring your frequency of communication, and overall number of touchpoints, comes into play.

    Tracking the number of outreach points throughout the deal closing funnel helps answer questions like “what’s our average time to close a deal,” and “how many times did we have to check-in to close this deal?” 

    By monitoring these performance metrics, you can arm your sales team with the data they need to understand when, and how often, to communicate throughout the sales process. You can also unlock areas where your team may be over-communicating, under-communicating, or need some refinement in their messaging to better tailor the conversation to a deal’s stage at any given point in the funnel.

  1. Cash Flow

    To put it bluntly, no one wants to invest in (or own) a company that’s not making money. Cash flow is a key performance metric that clearly shows investors how much cash a company is generating.

    Firms can measure cash flow on EBITDA—the acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is the leading indicator of a company’s financial performance and potential to earn, and is what will help the investor determine their ROI (ie: if they’ll be able to sell the company for more than what they invest upfront).

  2. Industry-Specific Metrics

    We hate to be vague, but each industry and business will also have its own unique metrics to track against. Do your research to learn the drivers moving the needle in your specific industry to understand what you should be concentrating on.

Monitor and Report on Your Key Performance Metrics

Once you have your set of KPIs, you’ll want to monitor and report on them regularly (weekly, if not daily). By keeping a close eye on your firm’s performance against your KPIs, PE/VCs will be better able to adapt and pivot if needed in real-time, unlocking new areas of growth and success throughout the firm. 

Through leveraging the use of automation platforms designed for PE/VCs (like Altvia), firms can integrate all of their data into one centralized platform and run reports at the click of a button, providing more time to interpret that data and make actionable decisions. 

For example, before integrating Altvia at their firm, Spire Capital was relying on spreadsheets for putting together labor-intensive and time-consuming reports, such as recording financials for their portfolio companies, providing information for monthly financial reviews, and producing quarterly and annual reports. 

With Altvia’s help, Spire Capital implemented a custom dashboard, providing immense time savings and increased transparency across the business. The firm can now use their custom dashboards to easily pull up mark-to-market valuations (cost, fair market value, etc.) at a fund level for each portfolio company, empowering them to better serve LPs. 

Add Value with Data-Driven Dashboards

Through automated platforms designed to help firms better visualize their data, PE/VCs can provide investors with data visualization that provides deeper value and insight than a spreadsheet ever could. 

With Altvia’s platform, firms can simplify investor communications and drive LP loyalty through a modern experience that includes interactive dashboards, videos, and charts that bolster engagement. With features like ShareSecure, firms can easily create custom KPI dashboards to share with investors through a secure link—no .csv downloads or multiple email attachments required. 

There’s a lot of data available to PE/VCs today, which means there can be a lot of noise when it comes to determining the metrics your firm uses to define success. While these five key metrics can help your firm track success, it’s worth noting that each industry and business will have its own unique metrics to measure. 

To revamp your KPIs and set up custom reports and dashboards to arm investors with the data they really want, contact our team to get started.

key performance metrics

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.