How Much Fund Management Software Do You Need?

Private Capital Market firms are in a time of transition. Firms that were once considered niche or second tier have grown to become major players in the industry, and they now compete with the likes of Blackstone, KKR, Carlyle Group and others for new investments.

Altvia understands this evolution and has developed an engagement platform for GP-LP relationships to be successful through all stages of a firm’s lifecycle: inception, growth, expansion and ultimately exit.

Determine what level of technology you need

One of the key factors to consider when purchasing software is whether your firm needs a technology solution. This may sound obvious, but as we’ll see in this article, there are plenty of people who need help determining what they actually need.

Some firms don’t feel they have any business challenges that can be solved with better software. They often find out later that their existing systems couldn’t keep up with market changes and higher performance expectations without extensive redevelopment or replacement, which led to lost time and wasted spend. This is what we seek to avoid for our clients.

Improve Core operations with fund management software

Software can be a vital tool in your strategy to grow and maintain business success. Some example use cases where software can give your firm operating leverage include: time management and monitoring performance metrics; ability to track investments across multiple funds or portfolios; effective compliance controls; clearly understanding how one investment is linked to another within the firm; onboarding new hires quickly.

These are just some examples where investing in a well-designed CRM system can help improve your business outcomes. Without a robust system in place, it becomes very difficult to see where your firm is outperforming vs underperforming in the fund lifecycle.

“Altvia has been able to identify new revenue opportunities by making it easy for GP’s and LP’s to manage their business. We were able to launch a product that is differentiated from the competition, because we understood what was needed from our clients.” says Kevin Kelly, CEO of Altvia.

It is critical for Private Capital Market firms to focus on improving their core operations so they can reach greater heights in this rapidly changing industry. Investing in improved operations is something that we have seen firms in private capital markets preach to portfolio companies for years but not all teams in the space are practicing what they preach.

Looking to invest in fund management software?

Our buyers guide can help anyone in the Private Capital Markets sector narrow down what partner you need to be sure your firm is on the right track for growth.

Read our Buyers Guide to Private Equity Technology for better understanding of what questions you should be asking before you decide. If you prefer to speak to someone about your current operations, you can always reach out to our team.

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.