Kjael Skaalerud, CRO, Shares Expertise in PE Tech Webinar

Recently, Altvia Chief Revenue Officer, Kjael Skaalerud, joined other private equity industry experts in a webinar titled Massive Tech Upgrade: How Does It Help PE? 

Moderated by Siris Capital Group Partner, Harrison Lung. The session focuses on the increasing importance of PE Technology.

Pandemic-Driven Technology Adoption

Harrison’s first question to the panel—which includes Yellow Wood Partners Principal, Sarah Mascioli Ensslen, and Aspen Capital CTO, Jacek Materna—is how the pandemic has affected technology adoption, including how it impacts GPs, LPs, and portfolios.

Kjael notes that surveys Altvia has sent out indicate that firms have differing opinions about what the industry will look like going forward, including a 50/50 split regarding in-person annual meetings versus online gatherings. So, it seems a hybrid approach is likely. 

Sarah observes that the pandemic and resulting reliance on technology has driven tremendous increases in efficiency and also in a firm’s capacity for connecting with stakeholders, both in terms of number and frequency of contacts. She also points out that firms are benefitting from the fact that video conferencing is much more personal than simple phone calls.

Jacek talks about the advantages that firms gain in the areas of workflow and productivity from leveraging more advanced technology tools. He also notes that having identified those advantages, firms are accelerating their timelines for technology adoption.

PE Tech Adoption: Survival or Competitive Edge?

Harrison goes on to question the panel about technology adoption as a “survival” necessity during the time of travel and in-person meeting restrictions versus technology adoption as a differentiator and a means to create a competitive edge. The panelists agree that the pandemic made technology adoption an absolute necessity—without new ways to communicate and connect with stakeholders, many firms would not have survived—but also concur that the crisis was an eye-opener regarding technology’s potential to create a strategic advantage.

For example, Sarah notes that video conferencing, which wasn’t often used before the pandemic, is now “an integral part of our way of working” and that her firm has greatly accelerated its use of data to stay ahead of the competition. Jacek shares that while technology was previously seen as an operational tool, it’s now viewed as have tremendous strategic value. He also points out the shift in mindset that firms and portfolio companies are now looking to surround themselves with technology partners that can help them create value.

Kjael notes that there seem to be two “cohorts” when it comes to technology: firms that are comfortable sticking with the status quo and firms that are “thinking about technology as a point of differentiation.”

In particular, his conversations with firms have revealed different levels of capitalizing on data—1.0, they have their data in one place, 2.0, they use visualizations to quickly interpret the data, and 3.0, they start using predictive algorithms and other tools to gain insights and speed on the fundraising and deal side.

Data Management & Governance

In another part of the webinar, the experts go into greater detail on data use, management, and governance. Sarah mentions that on the consumer side, data like cash register transactions and customer surveys have long been the lifeblood of businesses, and are used both in finding new and emerging brands and also in assessing the brands from a competitive standpoint for investment purposes.  

Jacek says that his firm isn’t simply looking at data, but rather building and harnessing data platforms—to drive their commercial and residential real estate purchase decisions, for example. They’re focused on using data as a “force multiplier.” Kjael observes that with the availability of data “exploding,” it’s crucial to determine what types of data are most important to you and, in that way, to create some advantageous data asymmetry.

Other Valuable Insights

Another key point of discussion in the webinar is how firms are mindful that “with great (data) power comes great responsibility,” including data security and data management regulations like GDPR and PII. The panelists also shared their thoughts on the ongoing shift toward more open technology ecosystems.

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.

PE Tech