The Counterintuitive World of Fund Management Software

Let’s geeks out on databases here for a bit. I’m guessing that most people who use or are evaluating fund management software don’t spend their days thinking about proper database structure. They already have a full-time job, after all, and I’ll be the first to admit that the topic of database structure isn’t exactly the sexiest or most exciting thing to talk about at parties.

Proper database structure is, however, key to getting organized, insightful, and actionable data out of the system you’re likely to be spending thousands of dollars on. It is also, unfortunately, often counterintuitive to a lot of the fund managers I talk to who are in the market for a new system or in the process of building their own.

(Incidentally, if you do really want to geek out on database structure, a good place to start is the Five Normal Forms in Relational Database Theory. Warning: it gets complicated quickly).

A common example of this counterintuitiveness is when users want to store everything they know about a given company on that company’s account page. This is where you might intuitively go to find out what stage you are in with that company or how much you have invested in them in the past, so it makes sense to cram as much historical information about that client on the same page, right? Well, no.

The reason that this is a bad idea is because you’re likely to evaluate that same company more than once over its lifetime and if you’re tracking due diligence on them in your database you’re either going to end up overwriting that data when you evaluate them again–at which point that information is then lost and of no value to your firm–or you end up stuffing that account record with disorganized historical data that is very difficult to report on or deduce any valuable insights from.

A lot of people make the same structural mistake when tracking post-investment data. I’ve seen plenty of databases in which a prospect has created a bunch of fields at the account level that are called “Investment 1,” “Investment 2,” “Investment 3,” etc. It looks like it might work; if you’ve never made more than one investment this seems like a logical place to store investment data. But what happens when your firm grows (hopefully it does) and you get to investment 11 or 12? You’ve got to add a new field each time which not only wastes a lot of screen real estate but also makes that data nearly impossible to aggregate easily. Before you know it, you’re six months or maybe two years into a new database and its already a tangled rats nest of data.

This is when we usually get the call to come in and untangle a custom-built system or maybe a competitor’s system and install a system with the correct database structure. Or, if you want to save yourself a year or two and a few hundred thousand dollars, give me a call and I’ll tell you what the correct structure is.

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.

fundraising software