Private Equity Tools to Build Trust with Investors

There’s no question that private equity is booming. Investors have allocated more capital to this space over the past five years than at any time in history, according to Bain & Company’s Global Private Equity Report

In addition, Pitchbook reported that a remarkable 23 startups have earned unicorn valuations in one recent year.

At the same time, deals are becoming more complex and the Securities and Exchange Commission (SEC) is tightening regulations. Naturally, this calls for greater scrutiny before deciding to invest. 

 For limited partners (LPs), transparency has become critical to their decision-making process. Before investing, LPs demand an understanding of how the data supports higher-level calculations and how it will impact their investments. 

As a result, LPs expect companies and investment funds to disclose more detailed information, including the nature of their investments, compensation to their managers, liabilities, overhead costs, and investment performance.

It’s no longer enough to simply use private equity tools to put together a nice-looking report with pie charts and bar graphs. These days, the success of your business depends on understanding the impact of the relevant data—and sharing it openly with all stakeholders involved. After all, if you don’t, your competitors surely will.

How to Build Trust with Investors

As LPs demand more transparency, many private equity firms are adopting technologies that give them the capabilities to organize, track, and present insights from the huge amount of data available. A well-designed platform can help you track where you are in the fundraising process and easily communicate status updates to investors.

If you’re putting together monthly or quarterly updates,  a purpose-built platform for private capital gives you the power to share documents securely and provides visibility into how often your investors are accessing the information. 

Even better, it can help you automate reports and communications so that your investor relationship tasks—as important as they are—don’t take up so much time.

Preparing to Implement a Private Equity Tool

Of course, the critical first step before adopting a solution is to determine the information that is most important to you and your investors. This typically is not all information, of course. So, with that list in hand, your firm can create a process to collect the relevant data—whether it’s financial or non-financial—and build it into the tool.

It’s also worth noting that members of the C-Suite consider transparency critical. According to Deloitte’s Effective Investor Relations (IR): Lessons from the Trenches:

“In our case, management is executing on a five-year turnaround plan….and helping investors understand what the milestones are and what they can reasonably expect along the way is incredibly valuable,” says Rob Binns, former VP of Investor Relations at Hewlett-Packard, who now serves as CFO and VP of HP Software. The feedback from investors, he adds, is that “they welcome an honest, straightforward story—they don’t want to be sold to, they don’t want to be spun to.”

Tools Designed for Private Equity

Altvia has developed advanced data and technology solutions specifically for the needs of private equity firms like yours. Our CRM combines the Salesforce platform with an email marketing tool to provide clear, secure, and easy-to-understand reports and communications to LPs.

The combined solution delivers advantages both for your clients and for you. Create an exceptional LP experience and support strong relationships while lightening your team’s workload.

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