Technology, Security, & Intelligence Influence in Private Equity

Jeff Williams Leads Panel at 9th Annual Private Equity US Spring Forum.


Jeff Williams, Senior Vice President, Industry Solutions & Strategy, Altvia


Misha Logvinov, Managing Director & Head of IT Strategy, EQT Partners

Dave DuVarney, Principal, Baker Tilly

Dan Kaytes, Vice President, Product Management, FIS

Altvia’s SVP, Industry Solutions & Strategy, Jeff Williams led a panel on Technology, Security, & Intelligence Influence in Private Equity at the 9th annual Private Equity US Spring Forum hosted by Markets Group.

The panel covered how alternative asset firms manage data and cybersecurity risks, and how firms utilize and leverage technology to improve firm, portfolio company, and limited partner relationship management and transparency.

As technology evolves so has the need to integrate new platforms. Firms that have both the internal experience to handle funds management and the technological capability to deliver effective services are likely to be the best positioned. 

How are managers using technology to protect their investments and integrate front, middle and back-office operations? 

Here’s what the panelist had to say.

What’s Happening Today in the Market?

The pandemic created the need to not only look at current data but look at future data. There has been a big acceleration of digital adoption. We have seen a 3-5 year acceleration over the course of a couple of months. Digitizing your workforce is crucial, and making sure it is as efficient as before, since being remote opened up a lot of risks. 

Shift from GP to LP 

A lot of firms’ investments pre-pandemic helped them adapt to the work from home environment. Systems need to be accessible from everywhere. When it comes to leveraging technology investments, some firms didn’t miss a beat. GP’s were able to respond to LP requests just as well as before.

Annual Meetings

Gathering data for these meetings is monstrous, and it almost helped going digital, so you are able to have more access to that data vs. being in person. Data is always going to be a challenge, but it is also a big opportunity. From a PE perspective, the manual effort is time-intensive, and it takes you backward vs forward. Getting a handle on your data will drive your ability to look forward. Some companies try to skip right to that, but it’s a journey and you have to make investments before you will achieve that level.

Data Investments in Private Equity

It is impossible to keep up with the increased number of companies being formed. Why don’t we utilize data for insights, qualify them, create a workflow around them, and make data-driven decisions? The abilities of digital are unmatched when it comes to manual work. It’s a long-term investment, but it comes with incredible results, and then you can scale it from there. Now we can get much broader data and information. 

Using Data to Tell a Story

We want to marry that data with other providers (ie. Preqin). Firms have to pull data from other sources and bring it into their own strategy for internal stakeholders and LPs. It allows you to provide useful data to the investors and the internal stakeholders. Data models are extensible so clients can change or adapt them to their firm’s initiatives. The adoption of data-driven decisions is likely to progress in phases, it does not happen overnight. 

Private Equity Security

There are secret weapons being developed, and it is important to make sure these are protected. It makes the stakes that much higher. The adoption of cloud infrastructure allows us to do things we couldn’t do before, but presents opportunities and challenges: you have to make sure the cloud is authenticating the individuals, segregating information, etc. There are advantages to working with the cloud provider, however, you still have to put a lot of effort into keeping the data safe.

Misha states the unfortunate irony of going digital, which opens the possibilities for your data to be breached. You have to double down on the security, but it will never be perfect. Firms have to be prepared and know how to respond to breaches because it is bound to happen no matter what. Cybersecurity ramps up at the same speed as tech adoption, because they go hand in hand. It will only get worse, so firms need to work around it, and create a strategic roadmap. 

Where Does Private Equity Go From Here?

A lot has changed in a short amount of time, but we don’t have time to stop and take a breather. Technology is only ramping up. We are seeing an influx of capital, new investors, and millennials getting into the workforce. This challenges firms to innovate on every front. The API’s and connectivity are critical to servicing the needs and sophistication of the clients. The ability to structure data for analysis is becoming critical. Since the workforce is changing, people are expecting digital, and firms who don’t adapt will fall to the wayside. Most industries have gotten more productive over the past year, and we as a society need to make sure we keep a healthy balance. Our mental and physical well-being is just as important.

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 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 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 — 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.