What Private Equity Firms Need to Know About Data Management

With data delivering more insight and metrics, it is no surprise more firms are using technology as a critical component to staying competitive

Private Equity Deal

Making deals and raising funds may seem to be all about the numbers, but any experienced 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, and the competition is fierce. You can’t afford to look like you don’t know what you’re doing.

Today’s top-tier private equity firms have a holistic view of their network of contacts and the influence they yield at their fingertips. They do this by using a CRM system built specifically for the unique and evolving needs of private equity.

Chances are you’re currently recording contacts, conversations, and notes in a disparate network of spreadsheets, emails, calendar invites, and even Post-It notes. This is no way to manage your crucial relationships and funds.

Data management systems like CRMs connect data from reports, conversations, emails, and meeting notes more thoroughly than you could possibly do on your own. A CRM records the history of every single contact—from how they are connected with the firm to their current industry position to previous roles.

When you’re ready to improve your firm’s efficiency by leveraging your valuable data, here are the considerations to make for your CRM system.

Start by Connecting Your Data

While the tech world is debating whether data is the new oil, it’s clear that the companies who know how to harness its insights are the ones who will succeed.

While private equity firms have been collecting data for years, many struggle to use it due to a lack of integration. Add in the rapid advancement of technology and it’s easy to understand why private equity executives report that leveraging data is the number one challenge they are facing today.

Accurate data is crucial during every stage of a deal. Yet accuracy isn’t always a guarantee. While private equity firms now 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.  

With no consolidated repository for important information, teams have to spend hours hunting down data, creating time-intensive workarounds, and trying to make sense of disconnected facts and figures. This approach increases the chance of errors and a risk to the firm.

Making investment decisions based on inaccurate information, failing to keep up with regulations, wasting budget on solutions that don’t work—these are the risks of poor data management.

Centralizing all of your deal data in one place will free up valuable resources and improve the accuracy of your data to improve decision making. Fund analysts, for example, can spend less time on administrative tasks sorting through emails, calendars, and Excel (read 10 Reasons Using Excel for Fund Management Doesn’t Work) 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 it. 

best Private Equity technology solution for firms

Choose the Right Solution

If you remember one thing from reading this, make it this: Develop your data analytics strategy to solve the problems you need to be 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?
  • What kinds of workflows does it offer for deal tracking?
  • Do the tools and the team demonstrate an understanding of how investors think?

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 and CRMs require change management, particularly during the implementation phase. You will need a support team that is committed to serving your team as you transition and understands the private equity business model. (Find tips on managing this process here)

Finally, decide whether you want a standard or customized solution. While a standard solution may promise the convenience of an integrated suite of technologies, you’re often stuck with lackluster capabilities that don’t serve the specific and unique needs of your firm.

Customized 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 This is why we partner closely with Salesforce to develop the most successful CRM platform for private equity firms that is continually evolving and improving.

In the process of determining if your firm needs a technology solution? Our new 2019 buyers guide can help anyone in Private Equity narrow down what partner you need to be sure your firm is on the right track for growth. Read our Buyers Guide to Private Equity Technology for better understanding of what questions you should be asking before you decide. 

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