How Many Fund Management Software Systems is Too Many?

As the options for fund management software increase, so do the number of private equity and venture capital firms that are adopting advanced software to manage their fundraising and investing. Also increasing is the number of firms changing their software or moving from one platform to another to leverage the most state-of-the-art functionality available on the market. 

We find that after switching systems, most firms end up with fund management software that streamlines operations for the area of the business that was in the most need of an upgrade. However, they maintain an array of other legacy systems with varying degrees of effectiveness in managing other areas. Rarely will a firm, for example, upgrade its back-office software, investor relations software, and investment software all at once.

So the question these firms are forced to ask themselves at this point is, “When does it make sense to keep legacy systems and when is it most effective to scrap legacy systems and move to an updated, fully integrated system?” 

Creating the Right Fund Management Software Ecosystem

We advise firms looking to implement the right fund management software to start by asking themselves what’s working. Let’s say a legacy system that handles investor relations aligns well with existing processes and has buy-in from users within the firm. Changing this system out might provoke significant backlash from your team. Having separate systems, after all, is not the worst thing that could happen.

The key is to have a good sense of what you’re trying to accomplish with each system and why. Then, you should also have clear delineations regarding who is doing what and in which system.

For example, one good reason to have your back-office systems separate from front-office systems is that you don’t want everyone in your company to be able to log in to your fund accounting system. So, you can build a nice artificial wall there between what people can see simply by not giving them access.

Another thing to consider is that some systems–especially back-office systems–have very specific functions that they perform well and consequently are fairly expensive. So, moving everyone to one platform might mean that you’re paying for people who, for example, only need CRM functionality to have access to fund accounting functionality that they’ll never use—and shouldn’t use. 

Fund Management Software Integrations: Look Before You Leap 

Integrating systems can be an effective option in some cases. But here again, it’s important to consider the reasons for integrating. Integration can be, depending on the systems you’re using, an expensive and time-consuming project. Often, it’s not worth the time and money required simply to have things integrated for integration’s sake.

You have to ask yourself, “Why is it important to have that data available in two different systems?” From a process and a workflow standpoint, you might just need to draw some clearer lines between the functions the two systems are performing.

Ultimately, consolidating systems does offer a lot in terms of efficiency and can provide your team with a more holistic view of your fundraising and investing activities. But it’s important to remember that maintaining separate systems—for back- and front-office operations, for instance—often makes more sense.

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.

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