Jeff Williams Featured in PitchBook Q2 Fund Strategies Report Q&A

Based on your clients’ recent activities across your tools, what is your take on the current fundraising market for private fund managers? Does their usage signify any evolution in utilization or approach that indicates the emergence of any broader trends? 

There’s no question that the market is hot, and—let’s be honest—it’s exciting to watch. Some interesting themes can also be inferred from the utilization of technology. I’ll characterize them as implicit or explicit trends or themes. In many cases, our platform’s users—GPs, LPs, and intermediaries—ask for features and/or advice without explicitly mentioning what they’re struggling with or providing much context. I enjoy these instances because I’m curious about which problem, or series of problems, the proposed solution attempts to solve. The reality is that these implicit requests don’t yield dramatically new insights that are worth readers’ attention. For example, three things are clear from these types of requests: Managers are attempting to raise as much capital as they possibly can as often as they can, the traditional fundraising cycles are becoming all but extinct, and managers are diversifying—much in the style of assets managers—to co-raise funds at the same time and with a related story. This is not breaking news, but I can confirm these trends are some of the more implicit requests from the market. 

From more explicit conversations, we can deduce something I find far more interesting. The overwhelming majority of these come back to three key trends: Managers have a heightened awareness of their story’s strengths and potential weaknesses, there’s a new breed of manager that isn’t paying much attention to the status quo and is using data and technology in incredibly differentiated ways, and all managers— including established ones looking to hone their stories— are looking toward technology as a solution to these challenges more than ever before. 

Interesting technological advances are happening everywhere you look these days. Having the perspective we do is exciting, especially because we’re now starting to see the future we expected and are well positioned to take advantage of.

How has the shift to remote work over the past 18 months, and the subsequent gradual return to hybrid and in-person work, affected your customer base and prompted changes to your strategy? 

Our initial reaction to the COVID-19 pandemic was no different from other businesses’ reactions. It was a scary, unprecedented time, and executives had no choice but to assume the worst. In hindsight, it’s much easier to see that we were sitting on a huge opportunity. For example, instead of scaling back technology purchases to cut costs, initially many of our customers dramatically increased spending to help new users benefit from collaboration features and the sharing of workflow and data that our technology provides within firms themselves. 

Not long after that, it became clear that this wasn’t just an internal systems problem; the way GPs sought out investment targets or provided customer service to LPs also had to change. The sudden inability to host annual meetings or sit down with target company management teams, combined with the increased anxiety felt by both parties, required new ways to engage with other crucial parts of the ecosystem. 

While we hadn’t imagined the catalyst being a pandemic, we were fortunate to have been positioned to take advantage of a future where our technology played an increased role in the market’s value chain. It was another case of our initial fears being based upon unknowns that would ultimately lead to huge opportunities. 

The reality is that as cliché as it sounds, the world has changed, and some things will simply never be the same. For me, that’s the spirit that is accelerating the broader trends observed in an earlier question: The market is no longer reacting. Now, managers are proactively and aggressively taking advantage of additional technologies to differentiate themselves. 

To me, the most obvious of these trends is establishing balance among the new world’s noise level. Remote or distributed work generates a lot of noise in the form of meetings, check-ins, etc. Technology both helps with collaboration and generates some noise that it can also solve. 

Although information is available when working remotely, there’s increased noise in what are effectively two opposites of the same spectrum: having to find something you don’t know you’re looking for, or drinking from a noisy firehose. We’re working to create user experiences that make clients aware of the information they most likely need and provide it when it’s likely relevant. We think the application of this at a basic level will contribute to another evolution of competitive dynamics, such as speed, in the market.

How have trends evolved across the different facets of fundraising, from marketing to administration? 

I mentioned it earlier, but it simply can’t be overemphasized. Fundraising and marketing are functions that were historically cyclical but are now always “on.” This is a simple evolution to acknowledge, but to keep up with the market, managers are now looking to technology that can help with this transition. As it turns out, administration can effectively frame this shift. Historically, firms saw fundraising, marketing, and administration as mostly siloed activities with some limited degree of overlap. I’d argue that the shift we’re seeing allows us to view these activities as concentric circles. If fundraising and marketing are always on, the process of interacting with LPs in an administration capacity is a key customer service function that supports marketing and fundraising. 

Relationship managers need to be able to react quickly to the informational needs of customers from the key part of the prospect base they’re currently marketing to—and vice versa. The increased level of technology present in the market today creates situations where, for relationship managers, not being able to quickly understand the health of the customer and/or prospect and acting as a result of that misunderstanding is simply not good enough. 

The result of this trend, from our perspective, is that firms are moving to break down silos between fundraising/ marketing and administration activities. The activities are coordinated with elegant precision, and typically— because of the historical silos—that means bringing technology systems that serve different functions together into a single, coordinated view. In most cases, these systems and activities are turned into tools built for relationship managers and marketers. 

Administration remains important, but it’s less strategic than the hub for marketing and fundraising and usually ends up supplying relationship management systems with the information they need to compete in today’s market. 

What are the key technical hurdles your clients struggle with the most that you target? 

Technology is constantly changing, and it’s happening today at a pace we probably can’t appreciate. One of the broader technology trends we observe, no matter the market served or organizations that make up that market, is the movement away from all-in-one technology solutions. Not long ago, the convenience of a single system offered compelling advantages over the difficulties of integrating key systems yourself. Those days are long gone. Many modern technology solutions come ready to interact with other systems, and in return offer better experiences for users in different functional areas. The all-in-one system often solved a key technical challenge but created the different problem of marginalizing users in at least one functional area. 

The most common technical hurdles we encounter are typically associated with this dynamic. In some cases, it’s the complications and paralysis that stem from the belief that all-in-one systems are still the only way to approach solving technology problems; in other cases, it’s challenges associated with unwinding and cleaning up technical messes created by this approach.

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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.

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