Recap: 2019 PEI Investor Relations Marketing & Communication Forum

4 Key Areas investor relations teams are looking to prioritize in 2019

From June 19-20, over 300 Investor Relations professionals came together at Convene in Midtown Manhattan to network and talk about the trends and technologies affecting their Investor Relations team and Alternative Investment firms.
 During the event, Altvia CEO, Kevin Kelly had a chance to moderate “Fundraising campaign management: sharing war stories” with panelists Michelle Daubar, from Oak/HC/FT, Laura Fahrney, from Ridgemont Equity Partners, Kathlika Fontes, from Grain Management and Tailwater Capital’s, Lindsay Grider.

Throughout the two days, there were a few consistent themes that our team heard that we wanted to share with those who may not have been able to join us at the event.

Investor relations teams are the glue of the modern pE firm

Positioned between the teams running investment sourcing and portfolio monitoring and leading the charge on fundraising and managing LP communications makes the Investor Relations team the conduit for the day-to-day activities of the firm and the messaging to the investors. Limited Partners today do not want to receive reports or metrics on fund performance directly from the deal teams. And with performance across the board hitting new heights, investors are increasingly more interested in hearing both more specific metric performance as well as information beyond the numbers. The Investor Relations team has the ability to translate the holistic message around the firm differentiators as well as build that custom investor communication plan.

Fundraising never stops

The formal capital raise is getting shorter and shorter with 56% of those seeking capital being closed or over-subscribed within 2 years¹. However, much of this seemingly reduced timeframe is matching with increasingly longer pre-market programs and informal relationship building to keep the LP relationship tight and the same investors in subsequent funds. The amount of travel and high-touch investor relationship building that occurs to keep the conversations strong and engaging has increased exponentially. As the one-panel member said, “I don’t know when I’m not fundraising.”

Left to right, Kathlika Fontes, Kevin Kelly, Lindsay Grider, Laura Fahrney

ESG Is more than a trend. it’s a movement.

Bubbled throughout the different panels, and primarily driven by European investors, environmental, social and governance (ESG) is a theme that can no longer be ignored but is still nebulously defined to many firms. Reporting or requirements on ESG were once held to side letter agreements but are now part of core due diligence documentation. Coupled with an increased goal of diversity in management, hiring, and promotion within the firm, the conversation about portfolio performance has widened to include these indirect factors of value beyond IRR.

More technology doesn’t mean better technology

The proliferation of products to solve LP document sharing, data management, and cross-firm reporting issues has not slowed down with firms increasingly determining that they have to move beyond simple CRMs and Excel to be successful (read 10 Reasons Why Using Excel for Fund Management Doesn’t Work). However, the answer is not simple with leaders trying to decide on needs ranging from all-in-one encompassing solutions to one-off programs that handle specific tasks. That, coupled with the increased reporting requirements from LPs and the above trends of high-touch investor relationships means the pain point of how to do this efficiently for the Investor Relations team is coming more to the forefront. IR teams also acknowledge that many systems are not built for their function, but rather for the deal teams who have a more surface-level need for managing data around contacts, companies, and funds. However, the IR leaders acknowledge that since the LP relationship lives with their team, they are becoming more of the conduit and need a seat at the table when determining the software that the firm relies on for success.

How is your firm looking at these trends? Let us know.

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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