What Private Equity Firms Need to Know About Data Management

This is the first blog post in a four-part series on how Private Equity firms can better use data and technology to their competitive advantage.

Private Equity DealMaking deals and raising funds may seem to be all about the numbers, but any fund manager will tell you that success depends on how effectively private equity firms can leverage relationships. These days, managing those relationships requires keeping track of vast amounts of information. Deals move fast, the competition is fierce, and you can’t afford to look like you don’t know what you’re doing.

But what if you had a holistic view of your firm’s network of contacts and the influence they yield at your fingertips? CRM systems do just that, recording a history of every single contact—from how they are connected with the firm to their current industry position to previous roles. Data management systems like CRMs connect data from reports, conversations, emails, and meeting notes more thoroughly than you could possibly do on your own.

Additionally, accurate data is crucial during every stage of a deal. And accuracy isn’t always a guarantee. Unfortunately, while firms have access to more data than ever, many are using inefficient reporting and tracking systems that slow down the process and degrade the quality of the data. Making investment decisions based on inaccurate information, failing to keep up with regulations, wasting the budget on solutions that don’t work—these are the risks of poor data management.

Read on to learn how to leverage data and CRM systems for your firm and the considerations to make when deciding on a system.

Start by Connecting Your Data

While the tech world is debating whether data is the new oil, it’s certainly clear that the companies who know how to harness its insights are the ones who will succeed. Add in the rapid advancement of technology and it’s easy to understand why private equity executives report data is the number one challenge they are facing today.

While private equity firms have been collecting data for years, many struggle with a lack of integration. Legacy systems are often dozens of disparate spreadsheets, calendar events, and email communications. With no consolidated repository for important information, teams have to spend hours hunting down data, complete time-intensive workarounds, and try to make sense of disconnected facts and figures. This approach brings an increased chance of errors and a risk to the firm.

Centralizing all of your deal data in one place can free up valuable resources, so fund analysts, for example, can spend less time on administrative tasks sorting through emails, calendars, and Excel and more time deriving value and meaning from the data to inform your firm’s strategy. More importantly, having confidence in the accuracy of the data also leads to confidence in the decisions made based on that data.

Next, Choose the Right Solution

The key takeaway for private equity firms? Develop your data analytics strategy to solve the problems you need solved, not around your current systems. Your data management system should be tailored to the unique demands of private equity.

When evaluating solutions, ask the following about the platform:

  • How well does it understand our firm’s particular fundraising requirements?
  • Which kinds of workflows does it offer for deal tracking?
  • Do the tools and the team demonstrate an understanding of how investors think?

Ideally, the system you choose should be powered by a team of people that are committed to serving as your business partner. Adopting any new software is a change for firms, and CRMs require change management. You will need a support team that is committed to serving your team as you transition. (Find tips on managing this process here.)

Lastly, decide whether you want an All-in-One or Best-of-Breed solution. While All-in-One solutions may promise the convenience of an integrated suite of technologies, you’re often stuck with lackluster capabilities.

Best-of-Breed solutions, on the other hand, offer more flexibility to meet your evolving business requirements. This is especially important if you want to continue using current applications, meet your investors’ unique needs, or even help your team adopt a new strategy for approaching their work.

If you’d like to see how top-tier firms use data and CRM tools to improve their performance and for more insights on defining a data strategy, read our Guide: Data & Technology for Private Equity Firms.