Achieve Optimum Efficiency in Your Private Equity Operations

Modern businesses have never seen such rapid technological advancements in private equity operations as we have in the last few decades. We’ve come to rely on technology like never before for a good reason—unparalleled efficiency. 

Every industry on the planet sees the difference that digital technology makes to their processes, reporting, and communication. And since Private Equity often underpins crucial flows of capital and effective decision-making in many industries, there is vast potential with adopting technology.

Most companies believe their differentiation is rooted in having a smart, well-networked team with a good track record. But, if most companies think this same way, is it still a competitive advantage? 

No, these intelligent, networked teams are blending into the pack. They need the right technology to give them a competitive edge.

Each Private Equity firm has a cobweb of processes. With today’s technology, the only way to be efficient in operations and beat the competition is to adopt technology that supports, elevates, and executes operations processes efficiently. 

Stop Wasting Time While Raising Capital

The pandemic has altered how relationships are built and made raising capital even more laborious as LPs require additional attention. The fundraising process has been prolonged, with most funds taking longer than 12 months to close. Companies can significantly benefit from tools that improve and speed up the processes while still giving LPs the attention they require. 

What does raising capital look like without modern technology, like artificial intelligence (AI)? 

Many firms have a process that involves copying and pasting email templates with details on a new fund, their strategy, and historical track records. They then follow up that email with a call to secure interest. It’s a slow process with no clear, systemized prioritization of prospects. Everything is tracked on a spreadsheet. It’s manual, it’s time-consuming, it’s not efficient, and nothing about the process distinguishes your firm.

Companies that embrace technology are better equipped to define and measure workflows—ultimately gaining knowledge to achieve better results. With the right tools, they can come to the table armed with information to help target the right prospects and close a fund faster by identifying:

  • Top capital raisers
  • Most successful regions
  • Origin of introductions most likely to close
  • Common characteristics of most committed LPs 

Knowing these data points helps businesses hone in on what works and avoid wasting time chasing prospective investors that are less likely to close. Firms can focus on LPs and investors who fit a specific profile to close the fund and generate the best returns. 

Technology can also help firms communicate their competitive edge with data. By using objective data, companies can convey their track record, ongoing execution of investment thesis, and other critical points of differentiation. 

Manage Deals with Advanced Visibility in Private Equity Operations

Managing deals with dated technology brings about a similar process: firms use spreadsheets to identify sources and the best deals from the last fund, they reach out to the respective management teams and get a deal process started. From beginning to end, it’s all tracked on a spreadsheet or a basic CRM. There’s a lack of coordination and access to relevant data that would significantly increase efficiency.

How can firms find and execute better deals? 

A company’s most proprietary data is just the beginning, and capturing more information related to their activities and from additional 3rd party datasets will paint a more holistic picture. 

With modern technology and AI built for Private Equity, firms can gain access to a centralized database, prioritize deals based on returns, gain visibility into networking and communication efforts, and craft a comprehensive view with 3rd party data from tools like Pitchbook, DataFox, and SourceScrub. 

Gaining visibility into the pipeline gives businesses the ability to move forward with a data-driven approach. It becomes easier to identify priority areas like deal sources and stages. Historical data plays a part in determining where you can improve future deals and optimize performance for optimal returns. 

Monitor Portfolios With Less Back and Forth

Low-tech firms monitor portfolio performance with more emails and spreadsheets. One-off emails containing excel documents with firm metrics are sent to the portfolio company’s CFO. 

Then firms spend a few weeks trying to connect with the CFO and follow up with more excel spreadsheets packed with smart-art charts and pie graphs. 

The snail pace is exhausting for everyone involved—especially since it matters how fast the business can identify high-performing opportunities and take action—knowing which investments are performing best and dealing with sources that yield the best results and returns are essential. The best businesses need to pull out trends, understand if an investment is off track, and intervene accordingly. 

By getting accurate information from portfolio companies with a standardized collection method, firms can bring storytelling to life with data and leave the competition in the dust. 

Modern technology for Private Equity firms provides: 

•    Portfolio Metrics (Financial & Operational)

•    Portfolio Firmographics

•    Benchmarking & Forecasting

By streamlining portfolio company reporting and data collection, firms spend more time understanding value creation and portfolio health. This understanding leads to better management, improved performance, happy investors, and ultimately more wins. 

Meet the Expectations of Today’s Modern Investors

Sending investors to a tedious document storage site, hoping they don’t get lost, and praying they don’t lose their password does not equal quality investor relations or the likelihood of a long-term relationship. 

To improve quality and efficiency with investor relations, it helps to be proactive and automate common workflows like PPMs, Cap Calls, and Distribution Notices. By doing this, businesses reduce time spent on one-off requests and take advantage of their data, interactions, and industry knowledge to build stronger investor relationships.

Technology can measure investor engagement to inform follow-up activities and talking points. If firms can see that an investor keeps coming back to look at a specific report, they can check-in, provide additional resources, and clarify any discrepancies. 

Opening up self-serve analytics in a user-friendly and secure portal provides an advantage to both investors and firms. Investors won’t have to wait for the information; they can go in and get it when they want it and feel reassured that their data is secure. 

Upgrading Your Private Equity Operations

By upgrading technology into the modern era, Private Equity firms have a lot to gain. Every firm has a “smart team,” and you need more than spreadsheets to help you make essential decisions in raising capital, deal and portfolio management, and investor relations. With modern software that uses AI and specializes in Private Equity, firms can supercharge their efficiency to stand out in the crowd.

Differentiate With Data

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 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 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 — 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.