Investor Relations Strategies to Keep Investors Informed

An Investor Relations Tool to keep LPs happy and satisfied is the cornerstone of a sustainable firm. Positive LP interactions keep funds alive: much more than perfect valuations or cost-saving operational changes do. 

In the pre-Covid era, cash was getting harder and harder to come by. During the height of the pandemic when part shortages and supply chain inefficiencies were commonplace, LPs had no choice but to sit back and pray their GPs wouldn’t report bankrupt investments in the end-of-quarter reports. 

Now, LPs have a much lower risk tolerance but the pandemic is hardly over in many countries where those inefficient supply chains originate.

Fundraising as a Data-Driven Pitch

Raising capital is more important than ever but, quite problematically, fresh cash is hard to come by. Even firms sitting on mounds of dry powder aren’t immune, capital calls only go so far. All hope is not lost however, there are many easy adjustments firms can make to their LP interactions to keep the cash flowing. 

At its core, raising capital is not similar to assigning credit lines. LPs are entrusting firms with precious cash with the hope that GPs spend their money wisely and return alpha. Just like modern banks, credit unions, and even car dealerships have technologically updated their credit assigning methods, LP feedback requires a revamp.

LPs want to be able to predict results before they invest. This of course means fundraising is now a data-driven pitch. One rather expensive option firms tend to take is simply hiring a fundraising manager to present themselves in the most favorable light and to leverage the manager’s connections. 

This may be a time-tested way to provide cash but the chances of maximizing LP synergies are very very slim. Once it comes time to raise again, these LPs seek to invest elsewhere especially after something as industry shocking as a global pandemic. 

Instead, firms need to come up with a way for investors to continuously keep track of their money and see the positive and even negative aspects of their partner firm’s investments. Painting a true picture of a firm’s performance is the best way to improve investor confidence. 

Create Transparency for LPs

One key aspect of any successful investor relationship is being able to provide the feedback the LP needs. The most eloquent way to do so (without omniscience of course) is simply letting the LP pick and choose what metrics they want to track. Similar to our analogy of credit lines, investors want to see comparable benefits. 

PE firms need a way to continuously compare their performance against industry benchmarks and, during the fundraising process, compare their fund structure to other firms.

All of these changes to IR can be centralized with a rather often overlooked solution: the dashboard in your investor relations tool. A comprehensive and even at times exhaustive collection of data visualizations, predictive analytics, and all the important tax, valuation, and exit reports. 

There is a downside to taking this course of action. If the dashboard is not set up properly, the UX/UI may be more of a hassle for LPs than it’s worth. Of course, the vast majority of firms don’t have the time to create a properly integrated dashboard, however, they need not do it on their own. Altiva’s team of analysts and tech designers collaborate to create a simple but powerful interactive dashboard for LPs that is directly powered by the firm’s data.

Stand out from the crowd

Firms need not change what they’re doing now in terms of accounting and reporting and their Investor Relations will take a big jump in the right direction. Minimizing the amount of time and capital spent developing a dashboard like this is quite important for most PE firms and so implementing an already proven solution is an easy and economical addition to any firm’s tech stack.

A well-defined dashboard lets investors keep track of the firm’s decisions and investments and keeps a strong bond between the firm and the investor. These bonds and partnerships differentiate top tier, long-lasting firms from the average 10-year lifespan rabble.

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.

investor relations