Leading for Success in Private Equity: 2017 in Review, 2018 in View

As 2017 comes to a close, what were the key developments in private equity for fund managers and limited partners over the past year, and what new opportunities can 2018 offer? Continue reading for perspectives from Altvia’s Founder & CEO, Kevin Kelly, on marketplace trends from 2017 and what to watch and plan for in the next year.

What are some trends that you’ve observed in the private equity industry over the past year?

There are incredible opportunities emerging as private equity firms change their perspectives on data, accountability, and transparency, and these changes show no signs of slowing. Increasingly, private equity firms will be judged on their execution and operational excellence in addition to performance. The firms that welcome this trend will pull ahead of their peers and differentiate more successfully in the marketplace.

In our business, we work with leading fund managers and limited partners and we’re seeing cultural shifts within organizations, rather than just attempts to implement new tactics. Historically, many private equity firms have tried to differentiate themselves with “secret sauce”: an arbitrage of information that allowed some managers to outperform others. The effectiveness of that secret sauce is diminishing.

We’re also seeing a shift in awareness. Leaders of private equity firms are understanding that just throwing technology at operations and systems, then hoping that a one-size-fits-all solution can help them separate their firms from the pack, is not the answer. It’s about choosing the right components for your business, then implementing them in an orchestrated fashion with good leadership and change management.

Lastly, with an increased understanding of the power of great systems and processes–and the ability to truly leverage data–information security is now front and center. It’s not enough for a firm to give lip service to information security. Smart firms and leaders know that they must demonstrate sound information security practices and be able to embrace continually evolving policies and procedures.

What are some of Altvia’s company highlights from 2017?

As a long-time Salesforce.com partner, the Lightning experience is a huge step forward. This enables us to bring more innovation to our products and solutions.

Our newest product, Altvia Answers, directly addresses the pains and needs of private equity managers and investors. Access control (rules that define who can see certain information and what can be done with that information) is a core function of Altvia Answers and extends to users inside of an organization as well as outside the organization when combined with our limited partner portal, ShareSecure. These solutions can help provide an organized and structured way to control who is consuming data, broadening a firm’s efforts related to information security and transparency.

Another highlight for us is the incredible expansion we have made to our teams in support of a vision we’ve had for several years: scalability. In order to continue providing exceptional service to our clients, we need to constantly optimize our operations. And the same thing is true for our product development; bringing increased rigor to how we conceive and develop products helps us truly solve market problems. As our client base and organization have both grown in size, we’re also bringing a higher level of specialization to ensure that our clients are poised to face increasing demands. As we look forward, we will continue to attract the brightest talent and be proactive in anticipating the specialized requirements that our clients will need. As I look back at 2017 and the great results that have already started coming out of this, I am confident that this is going to yield incredible dividends. We have gotten better and stronger, and the resources and capabilities we have heading into 2018 are unlike anything that we’ve ever had before. We are poised to do some amazing things in the next year.

Looking ahead to 2018, what are some factors that firms can consider for greater differentiation in the next year?

The best piece of advice I can give to fund managers and limited partners is that it’s not possible to just throw technology at a problem and expect change to happen. The most successful organizations will consider change management and effective leadership in order to make significant strides forward. Also, firms need to acknowledge that while it may take longer to begin performing tasks in a more systematic manner, the initial, upfront investment of working in a smarter way is going to pay dividends forever. This will also help organizations better leverage their human capital; stepping back and getting out of some of the mundane, manual operations that firms may still be using enables teams to work toward more fulfilling–and profitable–tasks such as raising capital, courting the right prospects, and sourcing better deals.

Stepping back and thinking more strategically, as opposed to grinding away, is the mindset shift that has to happen. Since this is a bit of a paradigm shift, it’s important for organizations to start with the right balance. Having an awareness of what technology or solutions can do will help to inform what might be possible, and raising awareness about those possibilities is what opens up an organization’s true potential. It’s all about bigger shifts that may take a little longer, as opposed to doing what’s quick and convenient right now, so that firms truly get the full value of the improved systems that are available.

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About Kevin

Kevin Kelly founded Altvia in 2006 and brings a unique mix of technical acumen, business development skills, creativity, and energy to Altvia. Before starting Altvia, Kevin served in a CTO advisory role to a Chicago-based Buyout Fund of Funds with nearly $1B under management. He has also worked in various technical sales, business development, and management roles in small startups and leading technology firms such as Cisco Systems and NEC Unified Solutions. He is actively involved in Colorado’s entrepreneurial communities. In his free time, Kevin enjoys hiking, skiing, and fishing the Rocky Mountains with his wife and 3 children and playing and coaching ice hockey.

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.