A Sure Sign That You Need Fund Management Software

Of all the symptoms of organizations that need a new fund management software system, perhaps the most common is that they currently manage all of their fundraising and investing in Excel spreadsheets. Excel is a great way to analyze data and is fairly robust in creating reports, but for performing functions related to fund management, it has its limitations.

Most Private Equity firms using Excel to manage their funds will store giant Excel workbooks on a shared drive and let their employees access the document to edit and add information to it. Invariably with this arrangement, multiple versions of the document get created and the validity of the data is compromised. Also, most organizations do not have measures in place for tracking what changes were made and by whom. So when data is incorrect, missing, or otherwise corrupted, there is no way to determine the source of the problem. Switching to a private equity software solution will make you more efficient in both fundraising and deal sourcing. With AIM, you can more effectively track potential investors and easily communicate with existing LPs. On the deal side, AIM lets you share due diligence and record details from each step in the due diligence process, ultimately letting you increase deal flow in a scalable manner.

The example of why you need to switch to a fund manager software comes from a client who was required to produce a list of everyone who received a PPM from their firm. Many times an organization will have sent out 100 PPMs, 30 of which are tracked in one spreadsheet, 30 of which are tracked in another, and 40 of which are unaccounted for. Obviously for regulatory reasons this presented an issue.

Another problem with using Excel as opposed to a private equity investing software, is that depending on where the Excel document is stored, it is not always accessible to everyone while they are on the road. Often files that are stored on a shared drive are inaccessible from outside of the office. Many clients we work with also choose to store these documents locally on one employee’s computer. This precarious arrangement allows for the possibility that the document could get lost or deleted altogether.

And finally, using Excel to track people and the organizations they are associated with has limitations relative to a fund management CRM system. Excel is what is referred to as a “flat” database structure, meaning that you can list individuals and their contact information but you can’t necessarily look up all the individuals who work for one particular company or view other connections between contacts.

For more information on Application Experts and why you need a fund management software solution like AIM, contact us today at (800) 914-9120. And follow our Fund Management Software Blog to follow our 3 Part series on integrating the right private equity software solutions. Next week we’ll discuss AIM vs. the Consultant.

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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