Deal Flow and Deal Management Technology

Perhaps more so than in any other industry, decision-making is critical to success in private equity and venture capital.

Make the right decisions and you can achieve outstanding results. Make the wrong ones and the losses can be just as significant.

But how do you arrive at “right” and avoid “wrong”?

When it comes to deal flow and deal management, it is critical that you have the infrastructure and resources in place to make well-informed decisions.

Deal Management: Addressing the Key Components

Effective deal management requires that you have certain key elements to guide your strategy. First, you need to have current and accurate data. Without it, you are essentially operating blindfolded.

And while the data you uncover through your own efforts is very valuable, it is vital that you also have a way to obtain supplemental data and bring it into your deliberations. Tools like Pitchbook, DataFox, and SourceScrub can be extremely useful in this regard.

You also need to have firm-wide visibility into your pipeline. If everyone in your organization is simply assuming that deals are progressing as expected, with no easy way to confirm or challenge that assumption, that is a recipe for failure.

In addition, pipeline visibility is crucial when it comes to the timeliness of task completion. If a particularly important action isn’t taken when it should be because the right people did not “have eyes on” the flow, that failure can hurt your chances of closing a deal or, even if you do close the deal, keep you from maximizing the value of it.

Deal Management and the Tech Stack: The Majority of Firms Are Looking to Improve

Blue Future Partners conducted a survey of early-stage venture capital funds about deal management technology and got insightful—if not entirely unexpected—results. They found that nearly 60% of respondents are motivated to update their technology stack in order to find more deals and improve their execution as they pursue those opportunities.

There are multiple reasons that this number is not surprising. For one thing, competition in the industry has gotten increasingly fierce as more firms come into an already-crowded space.

This has forced firms to find new ways to differentiate themselves and their services.

How can they do that?

First and foremost, firms strive to increase their “intellectual capital” by hiring the industry’s best and brightest. But, of course, with new firms entering the market every day, the availability of top-notch talent has become much more limited.

Fortunately, second in importance only to industry expertise is advanced technology designed specifically to support deal management and related activities. Any firm can implement solutions like Altvia’s platform and other systems to dramatically improve its operations. And those systems are both intuitive and economical, especially in light of what they deliver.

The Capabilities Firms Are Looking for to Support Deal Management

Firms looking to gain or maintain a competitive advantage are typically seeking four important capabilities in the technology they implement:

  1. Real-time, secure access to a centralized database. When data is maintained in an outdated computer system—or worse yet, in spreadsheets stored somewhere on a network—accessing it can be anywhere from difficult to impossible. And that scenario greatly increases the chances that deal management decisions will be made either without looking at key pieces of information or only after too much effort has to be expended and, in some cases, a competitor with better technology has beat the firm to the punch.
  2. Prioritization of deal sources based on returns. Every firm has limited resources, and successful ones know that focusing those resources in certain areas pays the biggest dividends. But which deal sources are those? The right technology can help firms identify them and prioritize the time spent on them.
  3. Visibility into networking and communication efforts. Providing all the stakeholders in a firm with the ability to check on deal progress is very important. In addition to the reasons noted above, enhanced visibility enables firms to better leverage the insights of the people who can now check on deal flows. How many deals are lost in part because a firm’s full experience and expertise are not brought to bear on its challenges and opportunities?
  4. Supplemental data. There was a time when firms managed deals using only what they knew internally. That time is long gone. Firms today need to leverage every relevant scrap of data they can get their hands on to improve their odds of success. But, of course, simply opening the data floodgates is not useful. You need the data streams but also the deal management technology that enables you to ingest that information in an orderly manner and make sense of it.

With these components in place, your firm can be competitive in any situation.

Deal Management: It’s About Both Accelerating and Controlling Deal Momentum

In the end, effective deal management is all about accelerating effective deals while still controlling the process.

At Altvia, we understand the role balance plays in achieving better returns. Consequently, we continually update and enhance our systems based on conversations with users and the insights they provide on how technology helps their firm perform better.

We also provide enlightening demonstrations of our systems so that firms understand how our product suite:

  • Functions as a hub for internal and external stakeholders
  • Enables better management of complex relationships
  • Offers many integration opportunities that make connected systems more effective
  • Incorporates insights from our team of industry veterans

In less than 30 minutes talking with our experts, demo participants see the value of having the right deal management technology.

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.