A Hyper Competitive Market Means Deal Flow Needs to Go Digital

Throughout the year, mid-sized VC firms source and screen anywhere from 200 to 1,000 potential deals. With this kind of volume, PEs/VCs need every tool they can get to screen the markets and develop portfolio companies. 

It’s no longer enough to look at the usual factors (market position, historical performance, industry trends, cash flows, and capital expenditures). To improve and streamline all areas of the business and keep your firm operating at peak performance, PE/VCs must take steps to digitize their deal flows or risk being left behind by the competition. 

Why Digitize Your Deal Flow?

Digitization often requires additional capital, but the benefits of the investment pay off quickly. As more and more firms undergo a digital transformation, CRM software revenues are expected to reach +$80 billion by 2025, and, based on findings from The PwC 2016 Global Industry 4.0 Survey, it’s clear why.

Companies that have implemented a full digitization strategy are projected to increase revenue by an average of 2.9 percent within the next five years while reducing costs by an average of 3.6 percent per year. But that’s just the start. 

Firm digitization benefits have a cascading effect across every functional department, from R&D through to IT. By implementing a digital strategy, paired with visionary C-Suite leaders focused on driving the changes digitization brings, portfolio companies can be armed with the right approaches to increase revenue and growth and justify higher valuations. 

Support R&D and Innovation

When it comes to R&D and innovation, change and distribution are rapid, but a company with the right strategies to quickly adapt and address those changes will be most successful in lowering costs and increasing sales. 

Collecting and analyzing different data quickly is a common challenge most companies face, but with a PE-designed tool like Altvia, firms can arm portfolio companies with visual reports on a combination of industry, traditional, and nontraditional data to quickly identify problems, industry trends, and drive changes and decisions. 

Streamline Purchasing and Production

While the upfront costs of digitization can be high, the investment pays off quickly as operating expenses decrease and outputs and earnings increase. By integrating automation into purchasing and production, companies can continually monitor offers and suppliers to ensure costs stay low as\production outputs grow.

Leveraging data and analytics in sourcing and operations management also allows for continuous monitoring and prediction of processes, which can then be quickly optimized. As an example, through the monitoring of equipment and performance, companies can use predictive maintenance, which allows for equipment maintenance to be automatically scheduled, essentially solving problems before they even happen. 

Optimize Supply Chains and Logistics

Digital capabilities can be used in every link of the supply chain, leading to big gains in efficiency, maximizing integrations, and optimizing inventory levels. Through cloud-based platforms, companies can plan in real-time and benefit from end-to-end collaboration with suppliers and customers. 

Additionally, data-driven analytics and communication enabled by digitization supports improved forecasts and performance throughout the supply chain, allowing companies to track and trace supplies and identify problems in real-time. 

Empower Marketing, Sales, and Customer Service

To close digital marketing, sales, and service gaps and add value quickly, PEs need to be focusing on digitization. Companies with omnichannel marketing strategies focused on B2P – reaching people – are more effective in reaching a new generation of digital natives.

With a digital sales interface complete with customer reviews, custom product configurations, and algorithms that integrate and analyze data from supply and demand, companies gain the ability to not only automatically match things like competitor pricing but can also enhance the customer experience. 

For example, through gathering data about the customer experience – i.e., search trends, social media, transactions – brands can improve marketing, sales, and customer service by tailoring each and every experience to specific consumer profiles and behaviors. 

Better Enable Enabling Functions (HR, IT, finance)

Human resources, information technology, and finance departments that take advantage of digitization potential will not only support a company’s transformation but also run their own teams more efficiently.

HR can use technology to attract and retain better talent; IT can fully integrate collaboration and knowledge management tools with all business applications and ensure stronger cybersecurity; finance can access and analyze data to drive decisions across every area of the business. Through digital operations, teams can cut the time spent on critical reporting and regulatory functions, freeing up resources and sharpening the company’s insights. 

Five Steps to Digitize Your Deal Flow

The benefits of digitization across all business functions are clear, but it can be a challenge to get started. By breaking it down into a six-step framework, firms can quickly get started and make the most of their digitization efforts:

  1. Develop a Digital Strategy

    Hire the right people to lead the strategy, with an end goal to digitally connect your entire organization, including portfolio companies.

  2. Upgrade Your FIrm’s Digital Capabilities

    Determine the right tools to help level up your digital capabilities. With an all-in-one CRM designed specifically for PE/VCs, firms can leverage technology to streamline areas like operational efficiencies and investor communications.

  3. Embed Digital Capabilities in Deal Sourcing

    By utilizing data and analytics in deal sourcing, firms can find more qualified opportunities faster, get a full-picture view on how they stack up to the competition and make a stronger offer that will guarantee an acceptable return.

  4. Employ Digital Capabilities to Help Manage, Optimize, and/or Merge Portfolio Companies

    The ultimate goal for your digitization efforts should be an interlinked system that feeds into all of your portfolio companies. All-in-one platforms like Altvia make this otherwise time-intensive project a breeze and empowers firms to access the data and information needed to maximize portfolio performance.

  5. Develop a Talent Strategy

    To maintain and continually optimize your digitalization, you’ll need a team with strong digital and analytical skills in place. Train your current team, and hire new talent if needed to ensure you have the right digital expertise in-house to keep up with ongoing trends and innovations in digital. 

Digitize Your Deal Flow with Altvia

For private equity firms, digitization offers many ways to create value within portfolio companies by

improving their processes, as well as upgrading and expanding their product and service portfolios

As innovation in PE/VC continues to accelerate, PE/VCs must take steps to go digital to scale with the market – and Altvia can help. To learn more about Altvia’s solutions for digitizing your deal flow, start a conversation with our team.