How to Turn Your Firm Into a Digital Transformation Leader

Every company is becoming a software company. Today, no company can make, deliver or market its products well without a digital transformation. 

Two decades ago, Watt S. Humphrey, widely known as the father of Software and CMMI, predicted this shift and the transition to a world of software companies is undoubtedly here. 

We’re living in a “modern environment.” With the popularization of artificial intelligence (AI), machine learning, and the normalization of digital communication and remote work due to the urgency of the pandemic, the sentiment has never felt more real. 

Not only does technology connect us digitally, but it also helps sort through data, predicts outcomes, and warns of emerging issues faster than ever. 

Before long all companies will become data-driven, using data to improve their physical operations and using customer data to improve every aspect of the customer experience. 

Technology has climbed the ladder to become a vital lifeline and a differentiating factor for countless businesses in almost every industry. This digital transformation is not only beneficial for Private Equity (PE) firms but essential for future growth.

Defining “digital transformation” in Private Equity

So, what is digital transformation? “Digital” refers to  technology. PE technology should be high-tech such as the internet of things (IoT) and AI. “Transformation” refers to the evolution from a traditional company into a strategically digital company. Adopting any old technology doesn’t count, it needs to create value and scale.

For today’s portfolio companies, digital transformation with the right technology stack can provide the edge they need to stand out from the pack, increase returns, and reduce overhead costs. 

It’s not always a straightforward journey to the perfect tech stack, but by identifying your firm’s needs, choosing platforms that are equipped to handle the nuances of the VC and PE landscape, and supporting the digital transformation with internal training, you’ll put yourself and your firm in a stronger position to win.

Gain a competitive advantage

PE is a highly competitive environment. There’s a lot on the line and with increasing competition, details matter. Firms that find new ways to create operational efficiency and increase internal value will come out ahead. 

Investing in a digital evolution is one of the best areas to focus your efforts.  

It’s easy for PE to adopt a “good enough” or “it’s worked in the past” mentality. But the highest performing firms challenge the status quo and continually keep in step with new AI and IoT technologies. 

Not only do successful firms embrace the latest technologies, but they also monitor how these technologies impact their firm, how they affect their portfolio companies, and how they can use the technology to strengthen relationships with clients. 

Historically, PE investment decisions were rooted in gut feel and balance sheets and profit and loss statements, often created and managed in Excel. Not only is this data real-time, but it is limited in scope. Excel is a powerful, flexible tool, but it wasn’t created to help firms manage funds. PE needs to look towards holistic, industry-specific solutions, like Altvia.

For PE and VCl firms, the right technology leads to added efficiency and more accurate numbers reported, faster. PE firms can now amass unprecedented volumes of data that can inform—or derail— their investment decisions. 

Real-time intelligence allows data visualization to transform, normalize, and display your data to empower stakeholders to take fast action. 

The firms that rise to the top will be those that leverage technology and data to inform their decisions. Working in an outdated Excel spreadsheet will not help your firm stand out or make profitable decisions. 

How to Increase value with digital transformation

Operational value has become one of the most dependable, primary sources of value creation. 

A successful adoption of digital operations furthers that reality and is a value boost that multiplies any of the firm’s existing efforts. Focusing on operational value creation will make your firm more competitive and more likely to deliver top returns. 

Centralized data management and automation from a solution like Altvia provides a cohesive view of contact information conversations, email exchanges, and leverages 3rd party data all in one place. Bottlenecks that appear in operations are minimized with increased transparency. 

Another operational advantage that technology can provide is the ability to leverage data for unparalleled insights into the engagement levels of LPs. LPs can be given access to a secure, self-service information portal. They are pleased with the ability to get the information they need exactly when they need it and their engagement can be tracked so firms can pull insights and further personalize interactions.

Not only will firms engaged in digital transformation experience operational value increases, but they will also increase value for their portfolio companies. With data being within reach at all times, insights and opportunities are spotted faster so action can be taken quickly to capitalize on the moment. Streamlined reporting and communication will ensure your investor relations team drives high-impact outcomes for your investors.

Reduce overhead

There are numerous ways that technology can reduce overhead costs. One of the biggest cost savings has to do with the reallocation of your team’s energy. With the right tools in place, your team can be freed up to do more strategic work that supports the future of the firm. 

For example, firms need a dynamic hub where everyone can enter and find data quickly and efficiently. This is especially true as organizations increasingly adopt a “dispersed workforce” model. 

Effective deal flow management is no longer possible using water-cooler conversations, emails, documents, and spreadsheets.

Purpose-built private equity databases make it easy to collect data, help teams prioritize, and identify top-performing deal sources and top conversion rates at each stage of the funnel. 

Team members spend much less time digging through data and guessing at the most valuable opportunities. The technology allows teams to vastly improve their performance and success rate, saving the firm time and money in both the short and long term. If you’re considering embarking on a digital transformation, talk to the Altvia team about our holistic, industry-specific solution for Private Equity, Venture Capital, and more.

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.

digital transformation