How to Implement a Data Strategy for Your Firm

A data strategy is no longer reserved solely for the tech industry. Without one, PE/VC firms lose out on improved outcomes and enhancements in everything from deal origination to value creation. However, if you’ve never implemented a data strategy, the process to do so can feel a bit overwhelming.

While data strategies for VC/PE deal funnels have been a “nice to have” in the past, they’re quickly becoming the standard for firms looking to level up their strategies and processes. So how can your firm implement a data strategy guaranteed to get you ahead? Read on to learn how.

Leveraging Alternative Data

To differentiate your firm and reap broader returns, start by differentiating your data and technology approach, beginning by leveraging alternative data. 

Alternative data, put simply, is non-traditional data that can be used throughout the investment process. This includes data from social media, consumer transactions, web traffic; data that is typically not readily available internally to a firm from traditional sources like Bloomberg or FactSet. By leveraging alternative data sources, firms can identify deals earlier in the sourcing process and single out the best investment opportunities for their firm that much faster.  

Implementing a Data Strategy

To begin seeing the benefits of incorporating alternative data sources into your firm’s process, you need to set a strong data strategy, and that starts with appointing a lead to manage it. This doesn’t necessarily mean you need to head to the job boards to find a new data scientist to head up your firm’s initiatives. In the early stages, you’ll be better off appointing a senior analyst who is familiar with your firm’s processes and current data sources to help develop a maintainable strategy.  

It will be up to this data strategy lead to allocate a budget, audit existing data sourcing processes, and identify the best starting points for your firm to begin sourcing, and leveraging, alternative data. This can range from due diligence, deal sourcing, or post-deal monitoring. Wherever you choose to start, focus on building out a core strategy for each phase before furthering development in other areas. 

Measuring and Reporting on Your Data Strategy’s Success

Without a proper reporting system in place, your firm will be left in the dark as to whether or not your new strategy is effective. How you measure and report on your strategy’s success can differ based on your industry and unique firm goals. A few starting questions to consider include “how many datasets should we evaluate?;” what stages of the investment process should we target?;” and “how many investment decisions should incorporate alternative data?”

Once the core key performance indicators (KPIs) are in place, firms need a robust software solution to pull data from multiple sources into one centralized system that can run automated reports and produce visual dashboards. These resources arm key stakeholders with powerful insights on everything from portfolio monitoring to due diligence. Plus, this knowledge empowers PE/VCs to focus more on strategic initiatives and adding value and less on piecing together data and compiling manual reports.  

In fact, after implementing Altvia’s data-driven software, the team at Crosslink Capital has been able to leverage multiple data points to fuel their firm’s success. They are now easily able to determine where their fundraising efforts have been most successful and what types of investors are most likely to invest with them, giving them more time to focus on what moves the needle.

Improve Outcomes Throughout the Funnel

With a strong data strategy, firms can leverage the information they receive to improve performance and outcomes throughout every funnel stage. Firms can combine alternative and internal data to find better deals by continually monitoring the industry and emerging trends to identify patterns and target new investment opportunities. When it comes to adding value, this same data can unveil new opportunities and boost value for current portfolio members.

During the due diligence stage, firms can fuel their process and gain a competitive edge by leveraging big data to enhance their decision-making. Along with deeper insight into customer behaviors, firms can more easily determine the level of brand awareness and competitive positioning of an LP, while getting answers to key questions like “how effective is the marketing strategy,” and “is the growth sustainable?”

Arm Your Firm with an Effective Data-Driven Strategy

It’s important to remember that while data can improve outcomes and firm performance, it still requires a human touch to effectively execute the strategy and make decisions based on the data’s information. 

To help your team make the most of your new data strategy, the key is ensuring all of that data is in a centralized platform that can serve as your firm’s single source of truth. To set up a centralized place for all data sources to live, get started by contacting someone from our team.

data strategy

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.

data strategy