The 'digital collision' coming for pe & vc
Join us for a discussion on The ‘Digital Collision’ Coming for PE & VC, with thought leaders and bright minds from across the industry.
We are joined by Charlie Orr, Stone Connell, Bruce Sinclair, Tim Friedman, Jeff Williams, and Kjael Skaalerud. The discussion focuses on: the current state of PE/VC, the potential digital transformation presents, and what the winners / future landscape of PE/VC might look like.
By the end of the session, you’ll have a better sense of macro trends in digital transformation and actionable ideas you can implement at your firm to establish a more modern, tech-driven operating model.
We would like to introduce our panelists...
On the live event, we discussed:
- The status quo in Private Equity & Venture Capital
- The role modern technology plays in other industries today
- Envisioning the future and what leading firms will look like in the next era
- Actionable steps firms can take today to catch up or stay ahead of the curve
Kjael Skaalerud: [00:00:00] So hello everybody. Welcome. Unfortunately, we can’t see your faces, but hello. Hello. And again, just welcome. I’m beyond excited about the panel today. My name is Kjael the CRO at Altvia, and the topic for today.
[00:00:11] Again, I’m super jazzed and I’ll try to stay calm, but the topic for today is digital transformation or perhaps put a little more dramatically. The digital collision coming for private equity and venture capital. And, if you look at the industry it’s becoming radically more competitive every single day.
[00:00:27]PitchBook just released some data that in 2020, and in venture alone, there were 269 new firms that entered the market. And there was $69 billion in assets raised. And both of those were all time highs in their field, or I’m sorry, in those categories. And if you look broadly across the industry, a lot of the playbooks, a lot of the levers, many are as old, as 15 years old, as much as 15 years old.
[00:00:51]Financial engineering, things like that have really become table stakes. And if you talk to GPs and, we talk to a ton of GPS, all day, every day and you ask them, what’s the root of their differentiation. I would say as much as 80% we’ll probably give you something that’s along the lines of we’re a smart bunch, we’re credentialed or well-connected, and we have a really good track record.
[00:01:12] And, 80% of anything is not really that differentiated. So technology is I find it to be a very exciting thing because it offers this kind of vast potential or something that is for the most part, been untapped until this point. And so that’s the headline. How do we think about technology in private equity and venture capital, and more broadly private capital markets?
[00:01:30] And a lot of the funds that we work with, the more progressive groups they use the fund life cycle as really their guiding light, which if you strip away some of the nuance the mechanics boil down to as simple as target investors, raise capital, originate deals, execute process, deploy capital, monitor the portfolio and make sure that you’re creating value and then report out on that performance to your LPs just in time for the next fundraise.
[00:01:53]So it’s this virtuous cycle and success begets more success assets, grow portfolios, grow LP basis, grow, things like that. So that’s a simple framework that we hear more often in the market. And if in that kind of construct, the next question is, okay, cool. Where do we prioritize?
[00:02:08]Answering questions like who are and I would, I guess I would say, where do you prioritize? Most groups will index towards whatever their point of differentiation is, which usually boils down to how they raise capital, how they do deals. So thinking about questions like, who are the most engaged LPs, right?
[00:02:21] Who’s most likely to invest, why? Because we want to. Reach out to them and raise funds faster. If we want to accelerate fundraising cycles or, let’s really look at the portfolio and understand beyond, here’s our sweet spot beyond just revenue, EBITDA, margin expansion, things like that.
[00:02:35] But understanding objectively with data, like what are the true attributes that make the top performers, the really special portfolio companies who they are, so that we can use that information when we go out to find new portfolio companies. And then another thing that’s very common, right? Is this notion of LP experience or like, how do we give our LPs, they’re on I-phones, they’re on Facebook, they’re logging into Charles Schwab and fidelity.
[00:02:56] How do we give them that digital first, very modern kind of experience because we know that’s what they expect. So those are some of the questions that are out there. And I guess who is Altvia, very quickly. We’re a tech platform, built for private equity venture capital, and we help firms do all the stuff that I just mentioned.
[00:03:13] So just setting the table a little bit, just orient the group here and without further ado I put together just a few quick slides to take us through the agenda and make sure that everybody’s on the same page for what to expect today. The good news is my intro is out of the way. But we will start of course, with intros from the panel.
[00:03:34]And again, just last time, I’ll thank everyone. Thank you everyone. Truly sincerely from the bottom of my heart, I think today’s gonna be a really special conversation. And then in particular, thanks to the panelists. We appreciate you, but we’ll start with intros, have the panelists, give you a better sense of who they are, their work life, their experience, stuff like that.
[00:03:48] And then we’ll step in and frame the conversation around the status quo. What are we seeing today? Where are we at now? Where are we going from? And then we’ll move in and kinda zoom, more broadly outside of private equity and venture capital and have conversations more about what’s possible in terms of digital transformation or digital norms and industries across the economy.
[00:04:05] And then it’s going to get real good. And we’ll talk about the future, what are private equity and venture capital firms potentially going to look like in this next era, if technology becomes more commonplace. And then I know panels have a tendency to trend abstract, strategic. So I want to ask each panelist to put together one really piece of actionable advice so that no matter what everybody, today, you’re going to leave with something that you can implement or begin to implement tomorrow.
[00:04:32] That sounded right. And I can’t see anybody. These the panel formats are a little strange. Is that okay with the panel? Yeah. Cool. All right, here we go. And then, oh, sorry. We’ll also of course have 10 minutes of Q & A at the end, and then of course we hope that this is just where the conversation starts.
[00:04:45]I’m sure the panelists are totally willing to have conversations. I’m of course willing, Jeff as well, but hopefully we’re starting something special here. So Charlie, if you would kick us sir, give us a quick sense of who you are.
[00:04:57] Charlie Orr: Yeah, absolutely. And I appreciate Altvia and the Altvia team setting this up. I’m excited about this and this is. Yeah, I’ll try to keep it calm too. Cause I think this is an area where I get pretty jazzed as well and get excited about. But I help lead our business development efforts at Summit park.
[00:05:13] We’re a Charlotte, North Carolina bet based lower middle market, private equity firm raising out of our third fund of $250 million. And our two founders are childhood friends and that’s really embedded in our cultures. We really seek to be partners of choice for entrepreneurs and founders across the lower middle market.
[00:05:33] We’re a generalist firm. We spent a lot of time in business services, consumer services and direct to consumer and all things industrial. And from a just general technology perspective, my background and we spend a lot of time. Trying to leverage as much data from a sourcing perspective to an intermediary coverage perspective and also from LP and portfolio management.
Huge opportunity right now and excited to kick things off.
[00:05:58] Kjael Skaalerud: Awesome. Thank you, sir. Next up, Stone.
[00:06:06] Stone Connell: Yeah. I also want to echo thank you to Altvia for putting this on, excited to talk about it and learn from all the panelists here. I’m the Director of Finance at JAZZ Venture Partners. I lead the financial reporting, investor relations and just general operations at the firm for JAZZ.
[00:06:19]We’re an early stage venture firm, a little bit under a billion under management, across five different active entities. Typically our initial investment will be in seed series A, local support portfolio companies through as late as series D depending on their growth cycle. A couple of different opportunity funds to support companies throughout that.
[00:06:36] I’m also very excited to be here with everybody and kick this off.
[00:06:41] Kjael Skaalerud: Thank you, sir, over to you, Bruce.
[00:06:45] Bruce Sinclair: [00:06:45] Thanks, Kjael. And yeah, it’s also good to meet the panelists here for the first time and thanks everyone for coming in and watching our webinar. My name is Bruce Sinclair. I’m originally a mathematician, started my career as a mathematician.
[00:06:58] I was a programmer, I’ve been a VP of marketing, but then I was a tech CEO of a number of software and hardware companies, specifically AI, an AI company and an internet of things company. In 2017, I wrote the bestselling digital transformation book called IOT, Inc. It was published by McGraw Hill and I’ve certified thousands of students on digital transformation by my LinkedIn courses.
[00:07:21] And also I have a certification course of my own. Since 2015, I’ve been advising companies starting on the corporate side, but advising companies on how to digitally transform to create enterprise value. So first as an independent consultant, and then I was an operating partner for a private equity firm, middle market, private equity firm with a billion and a half dollars under management.
[00:07:42]Recently I wrote the book, The Private Equity, Digital Operating Partner Using Digital Transformation for Value Creation. So I think it’s really on the market, on the mark for today’s webinar. And currently I’m the founder and principal consultant of Digital Operating Partners. So we provide fractional value creation in the digital transformation for private equity firms.
[00:08:03] Usually, we’re looking at companies with around $30 million in EBITDA, but it can be a little bit less than that as well.
[00:08:11] Kjael Skaalerud: Awesome. I think it’s safe to say you might know a thing or two about digital transformation. Awesome. Good stuff. Tim, over to you, sir.
[00:08:21] Tim Friedman: Thanks Kjael. And I appreciate the opportunity to speak and share what we’re seeing in the market.
[00:08:25]So I’m the founder of PE Stack. We maintain a database of all the software and market data providers that service private equity and venture capital funds. So we’re tracking over 200 providers of software across front, middle and back office, and then also market data providers and next generation data providers.
[00:08:46] And we use that resource as the starting point for procurement, outsource procurement service. And so on a day-to-day basis, we’re working with GPS of varying size and different stages within that technology transformation and digital transformation to help them identify, assess and then procure the right software and data services that are aligned with their requirements.
[00:09:10]So we are looking at a wide variety of different products across the spectrum and helping firms to understand what their options are and who are the vendors that provide these various different data and technology and software services, and look to run them through a process of being able to compare these different services on a like-for-like basis and pick the right platforms in an efficient, confident manner.
[00:09:36] Kjael Skaalerud: Nice. And you left out that across all technology vendors in the entire galaxy, Altvia is number one in your heart. That means the absolute world to us.
[00:09:44] Tim Friedman: It certainly is. And you specifically, Kjael.
[00:09:48] Kjael Skaalerud: We’ll take it. All right. And last but not least Jeff Williams who around these parts we refer to as Dubs, but over to you, my friend.
[00:09:55] Jeff Williams: [00:09:55] Yeah. Hello everybody, Jeff Williams, I lead industry solutions and strategy. And I guess that means talking to the market and understanding what problems are out there and near and dear to me, because I started my career in 2006 at a venture fund of funds Greenspring Associates. And so had the pleasure and the pain of being on both sides of this equation, and mostly felt as though there was a big opportunity to build technology that started to look more like the future and more like B to C financial services.
[00:10:24] And what have you, been with Altvia for 10 years now, and that’s what we’ve been working on. So excited to talk more about it.
[00:10:31] Kjael Skaalerud: Awesome. And a shameless plug. This will be the only one for me, is our friend Dubs has a podcast: Preferred Return. That is absolutely exceptional. So if you’re a podcast fan, I would highly encourage you to tune in, but one last, super quick look at the agenda and then I’ll kill the screen so we can see everybody. Onto the status quo.
[00:10:48]The status quo in private equity. I know I alluded at it a little bit, but when it comes to what amongst your peer group, what Tim, perhaps in terms of some of the engagements that you’re working on, Dubs, the conversations that you’re having in the market, high level, what are the common workflows, at least that are being addressed with technology or more broadly, perhaps just some general, how are groups utilizing data?
[00:11:05]Let’s perhaps start there and Stone, I know that you, when it comes to kind of internal operations, you have, you think about that question in three buckets. Can we maybe start there and give the audience a framework to think about.
[00:11:17] Stone Connell: Yeah, absolutely. I think you alluded to the fund cycle in the beginning, and I think that’s where we, and I see venture firms particularly dividing up their workflows and the data sets.
And the first is the fundraising. Then there’s the capital deployment, there’s the portfolio monitoring the financial reporting and then finally the LP communications. And so I think that what we’ve seen is that people end up siloing, not only the team members that work on each of those functions at times, but also the platforms and the data that’s used across each of those.
[00:11:46] And it’s very much dis-aggregated and the systems don’t speak to one another. So as LPs go from the fundraising stage to a closed LP, to needing some of the ongoing reporting, a lot of times the systems need to manually transport that data from one to the next. And it becomes very burdensome on internal teams, especially the back office and middle office.
[00:12:05] That’s primarily corresponding with the limited partners. And sometimes you can drop contacts or it gets crossed on what actually needs to be communicated. And then the teams don’t know what has already been passed over. And so I think that the status quo is very manual and it’s something that a lot of teams have thrown bodies at, I think in terms of internal firms and just saying, okay, we need someone dedicated to fundraising, or someone dedicated to just communicating financial reporting information to limited partners.
[00:12:31] And I guess without getting too far into what some solutions are, that’s where I see data being very dis-aggregated and not speaking to one another. And it becoming very manual for the back office to make sure things run as efficiently as possible.
[00:12:43] Kjael Skaalerud: Cool. So just maybe if there is some technology in place it’s somewhat fragmented, means data has to be moved around, can yield a choppy experience for everybody involved.
[00:12:52] Okay. Got it. And Charlie, I know you, you think a lot about, where getting leveraged from data and if you were to speak, it seems like the status quo, everyone’s in a learning testing phase, like maybe sticking their toe in the pool. Could you elaborate a little bit on that?
[00:13:09] Charlie Orr: Yeah, absolutely. And completely agree with Stone’s sentiment. I think, when really I spend most of my time and having two responsibilities, one deploying capital and two adding value. And right now, there’s a huge opportunity on the technology side, on the deploying capital and adding value.
[00:13:27]But I think, as investors, we’re quick to push 100 day plans, we’re quick to push three year, five year strategic long-term visions. But we, don’t take the time to take a step back and look in the word, our internal processes. How are we pushing the same methodology across our portfolio, into the assets that we invest in?
[00:13:47] How do we apply that inwardly? And I think, recent example, we had a great DTC business when we pushed some customer segmentation and cluster profiling exercises. And we looked at how can we apply that from a sourcing mechanism? And look at the companies that we have interest in.
[00:14:03] And so I think the question is to look at internal operations and yes, the conversations that we’re having in the PE firms and our network, it’s really testing technology. I think everyone’s excited about it. We’re in the crawling phase right now, and it’s a great opportunity.
[00:14:20] Kjael Skaalerud: Cool. So perhaps a little bit of practice, what you preach, right on.
[00:14:26] And Tim, I know that you think if you’re looking at the market, like some would say that there’s a spectrum for technology adoption, perhaps there’s a polarized kind of ends to that and perhaps some gray in the middle, but that you’re finding that they’re really two distinct cohorts or sentiments really that are rapidly evolving.
[00:14:43] Can you give us a sense of how you define those cohorts and perhaps the speed at which you’re seeing change?
[00:14:48] Tim Friedman: Sure, and I feel that private equity has this reputation around that they’re slow for adoption and that they’re kind of behind the curve when it comes to technology. And I feel like to an extent that’s becoming a little bit of a cliche and we do panels like this, right?
[00:15:04] With a firm like Altvia, you guys have hundreds of clients that are using your platform. And as you said about your platform, this is giving your clients all of these advantages, as far as the things that Altvia can offer, right? And it can solve some of these problems in firms that use Altvia are now, towards the forefront when it comes to leveraging technology and data, and you’re making it easier for that.
[00:15:25] And yet at the same time, we also hear, okay, private equity funds are behind and they’re old school and they’re dinosaurs. I don’t think that is as true as it was if we’d asked this question three or four years ago. And so we work on a pretty wide range of projects. And we do have funds that are. very Excel-based and they come to us and they say, look, we need to digitize our say middle office portfolio monitoring process. We want to look at the various different options there and what they provide. And we’re basically trying to digitize an existing process and leverage technology to do that.
[00:15:56] And there are some that are at that kind of stage of the process. But then, we’re also dealing with firms. We’re working with a firm right now, where they are ingesting data from portfolio companies directly into Google Clouds. They have a data warehouse entirely, they’re using Looker for business intelligence, and we’re helping them to look for next generation data sources to enhance what they’re already doing, which is pretty forward-looking.
[00:16:23] And we find that one of the really interesting things going on right now has been the first time fund managers in particular, we are seeing their ambitions and what they’re looking to build from the outset to be more forward-looking as far as leveraging technology and data. And I feel like the point of which, as far as say, AUM goes, is the point at which funds are looking to adopt and understand the latest options as far as data and technology is lower.
[00:16:51] Like smaller firms are looking at this and used to be the case. And earlier in, their life cycle of a fund. And I feel like it is giving people a false sense of security to say that private equity is backwards. We are in some cases, but not to the extent that it has been before.
[00:17:09] And so there are definitely distinct cohorts as far as who’s dotted. Who’s not, but the trend is suddenly moving and shifting more towards firms that are now looking at technology really seriously.
[00:17:21] Kjael Skaalerud: For sure. We see that a lot too. Where in particular, somebody from a more tech oriented field is teaming up with a first time fund manager and it’s day one.
[00:17:29] They’re like, what are we doing? They’re like, we’re standing up a data warehouse, let’s get the data pipeline, like we need to get an analytics layer. So we get visibility into the metrics that we care about. And that’s just the status quo from the category that they’re coming from. So the actual landscape in terms of the human capital is changing a lot as well.
[00:17:44] Tim Friedman: And if you’re a first-time fund, you want to do this stuff, and you don’t want to wait until you’ve made 10 investments and you brace the first on and then let’s try and get all of this data and figure it out and get it loaded in. You want to be doing this stuff from the outset. And that’s the mentality that we need to see more of.
[00:17:59] Kjael Skaalerud: Totally. And Bruce, I know that you had mentioned, when most people in private equity hear tech, they think IT, right. And financial engineering kind of table stakes as I had alluded to. So where do you think the headspaces are today and how do you think about technology perhaps to compliment some of the comments that we’ve already heard.
[00:18:16]Bruce Sinclair: The first thing is to I’m going to be providing the audience a different perspective. So far our panelists have been speaking about more internal using technology. So data and technology internally within their fund to improve their operations where I will give the perspective is outwardly.
[00:18:32] So I work with the portfolio companies and I add value to the portfolio companies. So in my particular case where my experience is digital transformation, and digital transformation has so many different meanings. You alluded to it, Kjael, when you talk to private equity GPs, generally when they hear digital transformation or technology, they’re thinking IT.
[00:18:55] But in reality, if you think about it from a value creation perspective, IT isn’t where the value is. So one good way, for everyone watching right now, to think about technology, at least how it applies to portfolio value creation, is to think of it in three different layers. The first layer is like what we’ve been talking about here so far is more the operational layer, but for the portfolio company.
[00:19:16] So this would be things like IT, this would be like business systems. One of our companies, we had to do a lift and shift of their ERP system because it was a carve out. And so that’s IT work. And then business does, and that’s gonna be IT work in business systems. The middle layer, which a lot of people know about.
[00:19:32] I heard about it. That would be things like e-commerce and digital marketing, automation, robotics, and then RPA, if anyone’s heard of robotic process automation, this again is more of the automation, but really where the value, if you start measuring the value, when it comes down to enterprise value both upping EBITDA, and also upping the valuation multiple in my experience, it’s more using high technologies.
[00:19:59] And so this is the smart layer. And so this is things like. Internet of things. This is artificial intelligence. This is blockchain. This is all the, this is augmented reality. This is all the buzzwords that you see in the press, but, these technologies, the one thing we want to do is make sure we, then the last thing we want, when we’re trying, when we’re deciding where to deploy the capital and where to deploy our portfolio of companies capital in reality, is going to be make sure that the return on that technology investments highest.
[00:20:28] And we can measure all, digital transformation at a very high level, it’s really just a sequence. Again, I’m talking from a portfolio perspective is really just a sequence of digital initiatives. Each one of these digital initiatives will contribute to enterprise value. And so it’s very important to look at this from a financial perspective, but at the end of the day digital transformation is just another swim lane.
[00:20:48] It’s just another tool and it’s very much separate from the other value creation believers that GPs are using today. So the status quo, from my perspective, now that I’ve explained, it is what you said earlier, the status quo is, oh gosh, first thing we need to do is we need to make sure that the IT systems are all working.
[00:21:08] And so we got to do that before we get to the bells and whistles. But the reality is if you’re going to be selling your company to a sponsor, then maybe you want to do a little bit of work there, or maybe you want to leave that for them. If you’re gonna be selling it to a strategic.
[00:21:21] In all likelihood that lower level of operational technology is going to be thrown away and it’s going to be incorporated into a bigger picture. So I think it’s really important to just consider that there’s another value lever that’s out there and that the risk is going up.
[00:21:34] It’s out of venture right now. And then the risk is kinda minimizing. And so I think it’s just for everyone, maybe the, the one big message is just to consider digital transformation for the on the portfolio side is another value lever to add to whatever value creation techniques in this case, I’m speaking to GPs, but in whatever value creation techniques that they use.
[00:21:56] Kjael Skaalerud: Awesome. And last but not least and Dubs, if you could, I know that you. Perhaps even maniacally consider things from the LP perspective. So if you could maybe give us that view to round out more holistic conversation.
[00:22:09] Jeff Williams: Yeah. I was going to say, I’m glad that Bruce talked about it from the perspective of the portfolio company.
[00:22:14] I think, Stone may have said this, the tendency today is for many GPs to throw bodies at things, and it’s oftentimes very reactive posture, so there might be initiatives for certain systems and what have you, but it’s still, I think that the general kind of posture is a little bit reactive.
[00:22:32] I think it’s missing an opportunity because from the LP perspective, really thinking about what could we enable effectively in customer service, that’s an odd term. It’s sometimes a little uncomfortable to use here, but I think that the status quo today is missing that opportunity.
[00:22:49]Let’s wait for the LP to ask for that. And then we’ll throw an analyst trying to track that down. And I think that, we’ll get into it here, but the collision, if you will, that’s implied to be on its way, is going to be, what Tim mentioned, which is emerging managers that are being much more strategic and thinking about what the future of the experience for the LP could be like.
[00:23:11] And, it’s not rocket science, it’s just simply more proactive, more akin perhaps to like the B to C financial services stuff that we see. So I think it’s missing an opportunity for LPs today.
[00:23:26] Kjael Skaalerud: Got it. And also, I know some questions they’re starting to trickle in raise the questions in the chat as they come up when they’re fresh and inspired.
[00:23:32] And then at the tail end we’ll go through them and make sure that they’re answering any that aren’t. We’ll circle up with an email to pointedly respond to those questions.
Cool. And I think we’re running just a little bit behind. So I wanted to, just to shift gears and Bruce, I think you painted an amazing picture there in terms of the role that modern technology plays, in other industries today and I guess is on that topic Dubs, do you want to perhaps speak a little bit about how we’re seeing, again, like consumers, we consume all of us GPs, LPs investors, portfolio companies, we engage with technology all day, and as a by-product of that, we get conditioned, so to have certain kinds of expectations. So what type of impact do you see consumer technology having on LPs on GPS and expectations that way?
[00:24:19] Jeff Williams: Yeah I think that, if we go back 10 years ago, even seven, eight years ago it was logical to see, the sort of.
[00:24:26] The institutional LPs starting to come more and more to private equity that were also invested in other asset classes. Its natural, to think that the sort of same expectations, or at least comparable, or within the same, theme of what to expect in terms of reporting and availability of information would be the demand from LPs in terms of the consumers.
[00:24:48]It’s been happening now for quite some time. I had this moment maybe a year or so ago where I was, my phone showed me an article about Schwab introducing and integrating with Google assistant so that you could like, Hey Google, what’s my account balance. And I’m reading this article thinking like, why would anybody ever want to do that? And the article itself actually implied, like it’s probably less about the fact that somebody wants to do it, and it’s more about the sort of war that is being waged to gather assets and consumer financial services.
[00:25:17] And so I think that the expectations for consumers and so too with institutions now today, is in many cases being led by B to C financial services, where are the assets? What’s my exposure to this, that it’s on demand. What have you. And so I think that, even if we’re not there or we never get to the same, exact spot, obviously the type of information is very different.
[00:25:40] I think there’s no question that the sort of expectation is actually becoming that we ought to be able to have this information, especially when we’re committing hundreds of millions of dollars to a manager. It ought to be something that we can get proactively and not just have to wait for.
[00:25:55] Tim Friedman: And furthermore, it’s not their money. I think that’s the key difference. It’s not that money, they are responsible for other people’s money, Jeff. And so you think like it’s not a matter of personal preference, like it might be women talking about B to C, but you’re going to get to a point where the LPs are demanding this stuff and it’s not their decision.
[00:26:14] They are, it’s that fiduciary responsibility to be tracking these things in this way. And so if you’re not able to provide it, that’s going to be a blocker that we’ve been raising capital full stop. I think we’re going to start to see that.
[00:26:27] Bruce Sinclair: [00:26:27] I think there is that expectation.
[00:26:29] Like you guys are saying, just as we’re all consumers, we are all being bombarded by advertising. We’re being bombarded by the media because they’re trying to get clicks. And so we’re being comfortable. And like Tim saying, there’s an expectation that heck we should just build a point to double click in one place and we should be able to get the information we need.
[00:26:49] On the other side, I think, like I was saying earlier, people are starting to hear the terms, artificial intelligence. They’re starting to hear the terms, internet of things and augmented reality maybe not, but there’s also this smart mega trend that’s washing over us as consumers.
[00:27:04] You can see it with smart speakers. You can see with smart homes, smart phones, you can see with smart cars, these are just the autonomous vehicles. And I think that there’s a thinking within GPS and LPs as well that, wow, this, this is cool, but there hasn’t been that bridge over to, How do we deploy this within our portfolio companies?
[00:27:24] So most GPs are chasing tech deals. If you look at the numbers and you look at just from a percentage point of view, but really the biggest opportunity, at least in my view is taking a traditional company, which is going to comprise of probably 80% of most portfolios, and then transforming them into digital companies, as opposed to just thinking, oh, I got to get into digital because the reality is, if we look at a few years in the future, all there’s not going to be a technology sector.
[00:27:51] There’s not going to be a software sector because technology and software is going to be inside all, it’s going to just be part of all sectors. So I think this notion that you were bringing up earlier Kjael, of what’s the effect of us being consumers. I think we’re getting comfortable with these terms and we’re starting to see them.
[00:28:09] We’re starting to own them. We’re starting to use them. There hasn’t been that bridge yet. It’s going well, wait a second. We can actually make our companies smart. And what really smart means is data-driven. And, using that data to create value within their customers.
[00:28:22] Kjael Skaalerud: And I can’t believe you just said that, Bruce, because, and I’ve tried to scramble here to pull this up, but there’s a gentleman, Jay Crepes, who’s the CEO of Confluent and he has this quote and I’m going to butcher it.
[00:28:31] I was going to try and pull it up real quick, but it’s basically, it’s not that there are tech companies or there are software companies, it’s that we are all tech or software companies. And that increasingly our processes are defined, they’re measured, they’re executed our customer interactions, right?
[00:28:46] Like software has permeated into a place where businesses are defined in the technology. So as you said, it’s less and that’s, I never thought was literally the tech sector is just permeating into everything, but okay, excellent. Then I’m going to do my best to keep us on agendas, which I’m not well known for.
[00:29:02]Okay, so we are going to change gears and now it should start to get really interesting. So hopefully we’re all feeling like we’ve got the table set here and then we can start to think about, envisioning the future. So what’s a private equity firm look like in 2025, and we’ll just start there.
[00:29:15] Cause I think even four years from now, right? Like that, there could be some pretty radical change here. And Stone, I loved your comment and the black box days will end. So what do you mean by that?
[00:29:28] Stone Connell: I think my perspective, again, you can answer this question in many different ways, but I’ll focus on the venture firm or PE firms interaction with, limited partners.
[00:29:35] And I think particularly in venture, once a LP commits capital, they fund their capital contributions. And then sometimes they might just see the cash come back and not exactly know what happens between cash in and cash out as it becomes this kind of black box. And they don’t have an understanding of what’s happening in the portfolio, what’s happening with their money.
[00:29:55] How it’s being deployed, what are the ESG metrics that they’re investing in and creating a sense of loyalty to the firm? And so I think that those days are going to be going away. They’re quickly going away and diligence for all of our new funds. It’s been a top of the forum question on what is your reporting and what can we expect?
[00:30:13] And so I think that in the future, and maybe not even five years, probably six months to a year, even. It’s having the ability to make the interactions with limited partners seamless, and that’s from fundraising and closing investment, closing their contribution and commitment to the funds to actively informing them about their investment in the portfolio.
[00:30:31] And I think Jeff was saying that it’s not necessarily just what limited partners are asking for, in terms of the LPAA forms or whatever information they might want on the metrics for their personal investment in value. If the firms are pretty good at providing cap statements, I think it’s more about providing insights into the actual portfolio companies and those metrics.
[00:30:48] What is the revenue generated in creation since our investment in, so now to show how our firm is creating value for these portfolio companies, what are the clinical milestones that we’ve hit and how we helped them get there? What’s the geographic location? What’s the diversity metrics of the CEOs and leadership teams?
[00:31:04] These things are all becoming more and more important to limited partners and instead of being reactionary and just providing that information in a diligence call, it’s having that information accurately available for them through a secure portal. And so I think that for the GP/LP interactions, it’s going to drastically change and the ongoing amount of data and flow between the GP and LP in the near future and having the ability to do that hinges on a lot of things.
[00:31:27] And you could talk a while about it, but I think that’s where we’re moving towards. So I’ll stop there in the interest of time, but I think that’s for me and where I see our firm and many firms changing into.
[00:31:36] Kjael Skaalerud: Love it. And Charlie, I loved your comment too, where it’s going to be harder and harder to do something that’s truly exceptional in the market if it’s not rooted in tech or data. I’m sorry. Could you elaborate a little bit on that?
[00:31:52] Charlie Orr: Yeah, absolutely. And just to take a step back, I was listening to Jeff and Tim and. Bruce speak. I think one thing that we’ve done just to accelerate data and the use of technology across our portfolio, we had actually invested in a data analytics consultancy back in 2019 and during 2020, right professional service firms, a tough year for a number of onsite professional services firms.
[00:32:15] And so we deployed their resources across our portfolio. And so we had, anywhere from the data architecture, to the data profiling modeling to the actual output. So you have some sleepy manufacturing firm that’s got a great margin profile, but not using technology. We essentially made these tech enabled businesses that at the onset of the pandemic were not, and so we thought about the trend coming down the market and how we could leverage our current resources.
[00:32:42] And granted, it was throwing bodies essentially, but it got us up to speed and we got the chance to take an opportunity of a bit of a downturn and ramp up the technology side across our portfolio.
But just in terms of, lower middle market where I spend bulk of my time, that’s becoming extremely more competitive next five years and 10 years, it’s going to be more so, and I think about, the use of data and technology from a sourcing perspective, from an LP perspective, and also from portfolio management, it’s going to be a necessity. And so the quicker that we can get ahead of the curve, implement as much technology as possible while being strategic. And a lot of that is testing for us.
[00:33:19]We’re going to have a leg up in the competition. I think about outside data, right? There’s a number of third-party data sources. There’s a number of public data. We really look at how we can aggregate the data, how we can learn from the data and then be relevant to entrepreneurs and founders.
[00:33:34] So we want to be the first capital partner that they call and the only way that we’re going to be doing that is by being on the same page with them and the data, leveraging data, aggregating data allows us to do that. And so I think we’re gonna continue to push there, really compile as much information as we can.
[00:33:51]And if it’s leveraged right, a third-party resource to help make something of the data and then we’re going to do that just to get a leg up.
[00:33:59] Kjael Skaalerud: Got it. And something that we hear too. And there’s another great quote where it’s speed is more important than capital. How do we actually act on this information to make sure that not only we see the right deals, but that we get to the right deals first.
[00:34:11] And I know that you mentioned you want to be the first financial partner in an entrepreneur’s mind when the time comes, right. And the best way to do that is not to just cast a very wide net, but to cast a laser kind of sharp, specific net.
Awesome. And then I know you have some thoughts on, and I don’t want to totally pull you down the rabbit hole, but when it comes to shared resource models as well. What role do you think that has in a firm in 2025?
[00:34:34] Because I think that’s another topic and I think to enable the shared resource model, right? You have to have a really good handle on the portfolio in terms of operational performance, the gaps, be it talent, be it, customer acquisition, cost, et cetera, et cetera. That’s a fun conversation. You and I could jam it for hours, but how are your shared resources and where do you think that stuff’s going to be in three, four years?
[00:34:57] Charlie Orr: Yeah, I think we’re early there. I think we’ve looked at, how do we view our portfolio just from a holistic perspective, right? We’re generalist firms. So we were in a number of industries, a number of sectors, how does a direct to consumer tree and shrub business interact with the remanufacturer of fuel pumps.
[00:35:13]But I think, we can look at the amount of information coming to both businesses and how we can be the best financial partner. And sponsor to these companies by having some degree of shared resources. So we’ve looked at, we’ve got an outsource CFO, of course, but I think I’m on the data side and information side, rather than again, throwing bodies at it.
[00:35:34] We’re looking at technology platforms, third party resources that we can pull together to aggregate the information and have a holistic view across our portfolio. And so I think we’re early there, but it’s going to be a massive opportunity to see how we can combine businesses that seemingly right have no, obvious interactions, just from a margin perspective, identifying gaps, executing those, and learning from each other across a broader portfolio.
[00:36:04] Kjael Skaalerud: Cool. And there’s a very interesting article in HBR. I can’t remember then it’s like private equity, like achieves new level of maturity or something like that.
[00:36:12] But for any of the HBR followers, there’s a good topic on that, that elaborates a little bit on Charlie’s comments there. So Tim, and of course, anybody wants to jump in and share your mind in any way, let it rip. But Tim…
[00:36:24] Bruce Sinclair: I was just going to say, Kjael, if you’re looking at the future, I think everyone agrees that the digital tide is going to rise all boats. It’s going to rise the technology within the GPs, its going to rise the technology within the portfolio companies. So there’s compliance, I think of just more digital being part of our lives.
And the second one is, if you look at the next trend is there’s so many new private equity firms, venture firms that are entering the market now raising funds, and the returns have been going steadily down.
And you mentioned earlier that. The financial engineering, the arbitrage, the proprietary deals, all of this is becoming more, everything’s an auction and everything is becoming more normalized. And so I think there’s going to be the need and there’s going to be a demand.
[00:37:10]We’re talking about what we want to give to LPs, and they do want to know the information, but ultimately what’s more important about how the money is being used is a return that they’re getting on that money. And so there’s going to be more, I believe more demand on value creation within the portfolio companies to be able to get the returns as there’s more entries into the market, as there’s more commonalities between the firms. And private equity, has some very unique advantages over, let’s say a corporate or a strategic for making these types of changes and specifically it’s because there’s that desire for change.
[00:37:44] There’s quick decision making. You can align the resources very quickly in terms of. What needs to be done. And so to me, I just see, and again, it’s perhaps itself self prophesying, and self gratifying, but I see the confluence of technology and the need for more returns. Ultimately private equity is just going to adopt these higher technologies and use them within their portfolio companies.
[00:38:12] Kjael Skaalerud: For sure. Yeah. And that’s an interesting thing for me, cause I am in some capacity and operating partner, right? Like I was installed as part of a private equity partnership with Altvia to BCRs, and that type of transformative change is just remarkable and it’s the speed right. Is really exceptional.
[00:38:29] So that’s all very exciting and potentially with a digital undertone, right? That’s a lever that many aren’t pulling too hard or I’ve never pulled before and whether that’s internally or externally across the board. But I think that’s a very interesting perspective. Tim, LPs, what are they saying, are LPs asking GPs?
[00:38:46] Are they putting them on a grid? Here’s digital transformation? Where would you put your fund? We’re thinking about investing. We only invest in top cortile, digital firms. Are we there yet?
[00:38:56] Tim Friedman: I do feel like having a defined strategy around data, being able to prove that you are doing what you should be doing, is going to be an important question and is going to just be a standard for operational due diligence moving forward.
[00:39:09] And if you can’t provide the type of reporting that Stone is talking about, then you’re just not going to get an investment. It’s not going to be a case of saying we’ve always done it this way. And if you’re a public pension plan, then you’ll have rules around what you deemed to be the minimum requirements.
[00:39:26] These are going to be around things like having a defined data strategy and looking at these things. But I think from the GP perspective, you’ve got to think about what is the potential, right? So what could I be doing, if you think about data, what could I be doing to leverage my ownership of these assets?
[00:39:42] And there are a couple of things that you think about. So you think we’ve got access to this data, like in a perfect world, if I’m sector specific especially, I could be leveraging all kinds of data on, if it was say a SaaS focused play, then you’re looking at ARR, churn rates and all of these different things.
[00:39:58] And it’s the GP who gave them all of that stuff. If you think, look in a perfect world, I’d be taking all of this data, I’d be using that to enhance my management of these companies, I’d be using it to enhance my due diligence process. And I think that the other thing I would highlight is that we often talk about LPs and GPs, but then you’ve also got portfolio companies.
[00:40:16] And I feel like in 2025, you’re going to have private equity firms that don’t see themselves as private equity firms, but see themselves as more holding, that they are more like a strategic element, like a corporation, but that looking how can we leverage the portfolio that we have to provide insights back to that portfolio, and leverage connections that exist within the portfolio?
[00:40:39]We’re already seeing this, it started fast, but there’s definitely a desire for the GP to be providing more value back to the portfolio companies, which in turn will enhance value. But certain things like, look, let’s help our portfolio companies understand their relative position to the market in the sector because we’re sucking in all of this data and enhancing it with market data.
[00:40:56] We’ve got all this great stuff going on. How can we intelligently provide this information to LPs sure, but then also to the portfolio companies themselves the strategic advances. So I feel like that is the way to really think about things and what we expect to see moving to 2025.
[00:41:13] And I think the comparison to make is if you think about why the private equity funds have a key map for us, right? You think I’m investing in this private equity firm, and the people, if this guy leaves, then we could be screwed because that’s where all the knowledge is sitting. And I think you’re going to evolve.
[00:41:28] People have a similar perspective on that when it comes to the data, and how they’ve digitized bracing procedures, value creation plans, all of these things, to the point where that’s just as important, like that becomes part of the firm and you need these strategies in place.
[00:41:45] And, in a similar way that how the key flows were considered in the past, was going to have a key flows around what that data strategy is.
[00:41:53] Kjael Skaalerud: Yeah, totally. And arguably right. Private company data is among the most opaque and proprietary data around. So not only can you leverage that to help your portfolio companies understand, respectively, how they’re performing amongst the portfolio but you can round out your perspective of the market, right?
[00:42:10] So it’s a very powerful thing. And a lot of times that stuff’s there and there’s just not really a knowledge or an acumen around how to get leverage there.
[00:42:18] Tim Friedman: And it’s not just more data, it’s more intelligent use of that data, right? Likely a ton of stuff that you don’t want to do with it. You have to have a strategy around how you actually make that actionable and leverage that data intelligently, not just collect them.
[00:42:31] Kjael Skaalerud: [00:42:31] Totally. The tendency is like data. Okay. Let’s get more. It’s okay. I’m not sure what we do now. Cool. And Dubs, I know you think a lot about the effectiveness between GP/LP and I feel now that we’ve somewhat neglected the portfolio, critical piece of that kind of Trifacta, but, they’re going to be much more effective interactions because a lot of the surface level stuff is going to be the first thing that technology can strip away, like asymmetry around information, things like that.
[00:42:58] So how are you thinking about what those interactions will look like in the future? And what’s some of the fuzz that the technology could wipe away or that could, I guess preserve the humanness of those interactions, if you will.
[00:43:08] Jeff Williams: Yeah so I had an interesting experience this past weekend.
[00:43:10] My neighbor came home with a new car and I was talking to him for a minute. He told me how he had such a hard time finding this car. He’d been calling around all these dealerships. And my immediate thought was, I don’t think you have to do that. I think you could go somewhere on the internet and put the kind of car you’re looking for.
[00:43:27] And then, somebody who wants to sell it to you will actually give you a call when they have it. And if you translate that, I don’t think that, there’s ever a situation where, GPs/LPs get away entirely from building a relationship, but the LP, with the availability of data and information all the way through the ecosystem, right down to the portfolio company and operational performance, how did we create value here?
[00:43:52] Where is it in the data? I think that the ability for that data to become available, probably makes it more efficient for the sort of dating to proceed between GPs and LPs, because the story’s there. And then to your point to the question, I think that what that’s going to allow is not this sort of automated, okay we’re not going to get to know each other and go on dates.
It’s more of a, now we can know more about what we’re going to talk about on the date, right? Like the time that we spend can now be much more effective. And we’re not spending valuable face-to-face time looking at slides that are pretty opaque on where the underlying data is.
[00:44:33]You’re telling me the story you want to tell me. I want to find my own story in this data. And I think it will have at least some of that, of improving the way the GPs and LPs find each other and build the trust behind the relationship.
[00:44:49] Kjael Skaalerud: Cool. Cool. And I lost track of time.
[00:44:52] I figured I would get lost in this one, so if it’s okay, I’m going to just distill down when it comes to actionable steps from the panelists here and just get through that real quick. So we have at least nine minutes here for questions, but so most of the advice was that you want to really, make sure like it’s worth the investment of your energy and your time to stay current on the technology that’s available.
[00:45:12]Because it’s likely the case that you’ll need something six months before you do, that was from our man Stone. Charlie, I know you mentioned that it’s more about aggregating private company information, or just have some kind of data strategy so that you can connect your dots.
[00:45:25] And then Bruce, I should say you and Stone were aligned in terms of just get familiar, understand the landscape, that’s a very productive step. And then Tim and Dubs, you both were pretty aligned where it’s like, there has to be an explicit kind of cultural direction that’s established that is, we are moving in this direction, we will be more tech, more data-driven and then establishing a point of accountability, establishing a champion internally to move the ball forward.
So I think that those are all extraordinarily useful, and hopefully that’s helpful for the audience, but with that. But let’s pause and let’s see if we have some questions coming in here.
[00:45:58]Jeff Williams: So we do have a question, which is how do you de-risk these emerging technologies? So I don’t know, maybe Tim, maybe that’s perhaps one that you can chime in on and feel free. The attendee that asked that question needs to elaborate a little bit, if you are so inclined.
[00:46:14] Kjael Skaalerud: Go with a proven vendor.
[00:46:21] Tim Friedman: It’s actually, it’s trying to think beyond the vendors and beyond the specific applications, I think it’s way more common these days that firms are thinking around a wider data strategy and data architecture that underpins what they are doing. So you’re looking at these solutions, right? And you’re looking at different data providers and sources and ways of doing things, but you do it in such a way to de-risk it.
[00:46:46] So that if you were in two years to say, you know what, there’s a better technology for me on the application level, that I’m able to switch it out and get new stuff in there. You’re not closing off the avenues of opportunity moving forward. And so you have to have thinking about defined strategy.
[00:47:02] So you know what? I want to change this data provider. I want to add a new one in. Will the applications that I’m using and the underlying architecture around that support an ongoing strategy around adopting data and technology. And I’m always wary it’s a challenge, right? Because all of the market data providers, and to an extent, software providers are all incentivized to make it difficult to leave, and make their products very sticky.
[00:47:27] And there are different ways of doing that. That’s where you do that by having a really great, valuable product and great customer service. And then there are artificial means where your data’s locked up, you can’t access it moving it is difficult. And I always feel like it’s worth thinking about, the future and how that aligns with the strategy where I can add new sources and I can switch out applications.
[00:47:46] I own the data. I’ve organized it in the right way. And I’ve thought of the right kind of strategy around that. I think that’s the way to look at it as far as de-risking. And then I also feel it comes down to having a good plan for assessing the value of these technologies, right? So what efficiencies am I gaining by saving?
[00:48:05] I can put a dollar value on that and freeing up my analyst from doing horrible menial tasks that a smart 16 year old can do in Excel, and freeing them up to do more, value added tasks. And then just this opportunity, what opportunities am I gaining that I didn’t have before?
[00:48:20] What’s the value behind that? You need to have a framework of assessing the technology and the value that it’s bringing, and not just stick your finger in the air and think, Hey, is this good or not? We should be able to really answer that question with more robust metrics and science behind it.
[00:48:35] Kjael Skaalerud: Awesome. And Bruce, if you could add to that, and I would also blend that with. A conversation. So the first thing would be, how do you de-risk these very frontier, digital transformation strategies, cause I think common place AI, augmented re everyone’s okay, great.
[00:48:51] I have no idea what that means right and LPs included. So how do you, not only de-risk, but how do you bring down in normalize the nomenclature so that it’s concise and punchy and it’s something that you can articulate to LPs. And then we have one more question which will be around how to think about budgeting for these types of technologies, these data sources.
[00:49:09] And when do you put that stuff in house? But back to you, Bruce de-risking and speaking in plain, speak about it. So LPs are like, got it. Cool. Value creation. Sounds great.
[00:49:17] Bruce Sinclair: So first we’ll talk about speaking to the LPs. We’re going to speak to the LPs on the financial statements.
[00:49:24] They don’t care about the technology so much. They might preferably want to see the words. I might preferably want to see the direction, get some trends, but everything has to come down to enterprise value and everything’s going to then break that enterprise value into how do we grow revenue? How do we improve margins and how do we increase the enterprise or the multiplication value, multiple?
From de-risking there’s three different areas in using high technology. The first one, which we really haven’t talked about, because I guess it’s maybe not as maybe it’s not as obvious or maybe it’s not as important internally, because we get the idea, but the first area, of de-risking for high technologies too, is to produce the right digital investment thesis.
[00:49:59] So you need to have the right strategy. I think that’s maybe that’s pretty, I guess obvious, but the first thing is to get the right digital investment strategy. The second thing is we’re not inventing technology. Technology is a tool. All we care about are the numbers. The tool is artificial intelligence.
[00:50:15] Sure. The tool is IOT. The tool is going to be augmented reality, whatever the case is, but we have to have use cases where we can demonstrate on the financial statements, basically, how do we grow the company? How do we grow the company? And then how do we have a really good exit narrative when we sell the company?
[00:50:32] And then the third area of the de-risking is going to be the execution. And there’s often a knee-jerk reaction to go to the consultants in the reality, the consultants for these types of technologies that I’m talking about at the smart layer, not the automation layer, not at the operational layer, because I think consultants can do that, but here you need to find subject matter experts.
[00:50:52] You need to find vendors. You need to find service providers that are the best in their field. And combining those three things, that’s how you de-risk it. The last thing we want to do is invent something new. So really what we’re doing is just, we’re just stitching stuff together.
[00:51:07] And that’s that from, if we’re doing venture, that’s another topic, but I’m talking specifically from a private equity perspective.
[00:51:15] Tim Friedman: And Bruce, do you think that comes down to having the right people as well? Because I see more firms that have data scientists on staff from the outset, then looking to bring the right people in to manage some of these initiatives and they understand that they speak this language and they have that knowledge. Do you think it’s necessary to have the right kind of people that understand these things? Or are you okay just using external consultants to put systems in place, and do it that way?
[00:51:37] Bruce Sinclair: So ultimately there’s different models for operational improvement within the GPs.
[00:51:45]You can have an internal team, which I was part of, I was the digital operating partner. And so they have an internal team, but really you’re not going to have, you don’t want to bring in a data scientist unless you have the skillset internally to come up with the investment thesis, because we’ve been talking about data, but there’s a step before data and that’s value creation.
[00:52:04] So what’s the value that we want to create? What’s the information we need to create that value? What’s the data we need to collect to create that information, to create that value? And then what’s the tech we need to deploy to create that data, to create that information, to create that value?
[00:52:19] I think you’re jumping, my advice would be don’t necessarily start with the data scientists, although I think they could help in a lot of ways, but generally when you’re looking at a data scientist, you’re going to need three kind of components. One is going to be a subject matter expert in the field that the portfolio companies in, it’s going to be hard to find someone that’s going to be in all these fields.
[00:52:36] Two is going to be someone that knows how to use all the tools. So this is more like software development. And three is going to be someone who is an A kid, you know a mathematician. They need to understand the AI algorithms. They need to understand the protocols, all this underlying stuff that makes this happen.
[00:52:52] So for me, it’s really difficult unless you’re going to build a team. More likely you might buy a company and then you might want to run that company as a separate entity that has its own P and L and then use them as your primary. If I was to look at the data, but the second thing I would say is, we always have to transfer the intellectual property to the portfolio company.
[00:53:11] So whenever you build a team, my approach is like a movie producer. I work on the investment thesis and then I pull from my proprietary network the right folks to do the execution, do RFPs, and then do the execution. But as part of that, you have to transfer intellectual property to the portfolio company.
[00:53:27] You need to build a digital team within the portfolio company itself because on exit that’s what a strategic wants, we want to take advantage of the capability or the unique circumstances that a private equity firm has versus a strategic and public or a private strategic. They have a lot of headwinds compared to private equity.
[00:53:45] So that’s going to be something that’s going to be right there at Goodwill on the balance sheet. When they make the justification for the acquisition, it’s going to be, oh, we can take this team that has this knowledge and now deploy this knowledge or this now this intellectual property to the rest of our company.
[00:54:00]So you know, it just depends, but it just depends on the situation, but the things that really think about is it’s very varied and you want to make sure you transfer that intellectual property to the companies that you’re gonna be selling, because that’s going to be, what’s gonna increase the valuation multiple something I call a digital rewrite.
[00:54:17] Kjael Skaalerud: Cool. Cool. And then for those panelists, are you able to spend a few more minutes with us? Is that cool? Okay. For the audience members that are as well, one question that I wanted to point Stone and Charlie’s direction, and we’ll blend these together and it is, which part of the PE value change do you think would be most affected by digitization, or what’s like a big point of leverage when it comes to digital transformation in the firm?
[00:54:39] And how do you think about budgeting for these technologies or data sources? And is there ever a time when you think let’s just build this in house, so hopefully we can connect those two.
[00:54:52] Stone Connell: Yeah, I will kind of tackle the last one first. Sounds interesting, but on the building in house, I think it’s really a lot about what Bruce said, but on an internal perspective is if you’re building it in house, is that individual going to be able to have the expertise to help across the board for all the different data sets you might need from limited partners to portfolio companies and whatnot.
[00:55:10] So I think that could be a difficult hire. It could be, could be expensive. And so I think to mitigate that is by finding a fantastic partner that can help you with this. And so it’s not meant to be a shameless plug, but Altvia can play that role for firms. And we’ve worked with them on our LP, CRM and management, and we customize our database constantly, and we have a point of contact there that helps us customize it.
[00:55:30] And so I think that’s how we’ve gone around the ability to customize our data sets. So it’s not just a plug and play to get what you get from a provider. And then in terms of budgeting for it, I think it’s really, you need to take a big step back and look at your entire tech stack across your firm.
[00:55:44] And what is the budget for that you as a group, want to deploy into it internally, and having conversations with the end users internally, about how much is this worth to you and is it necessary to elevate your job function? Whether it be the investment team, middle office, back office. I think they’re coming up with a reasonable budget. It’s hard to say exactly the percentage of fees or AUM, whatever it may be.
[00:56:06] I think it’s very customized, but I think having conversations with the team to understand the importance of it will allow you to find an appropriate budget and. Compare that to what it would be like to staff in house, and the expense of that would look like, and it likely would be cheaper to find high quality providers to help you with your data management in this situation. That’d be my perspective.
[00:56:27] Kjael Skaalerud: For sure. Also internally too, if you do it right just quick 2 cents here, right? There’s usually only three pillars of the technology stack in any environment. And that’s how you manage your books/accounting, how you manage your employees/HR tech, or however you want to think about that, and how you manage your customers.
[00:56:41] And so those are usually the spinal cord from an IT perspective. And you can draw benchmarks too from portfolio companies, as just another kind of way to extract value from some of the day that’s happening there. But Charlie, anything you want to add there good, sir?
[00:56:55] Charlie Orr: Yeah. The only thing I would add, I think we look at, culturally we have to make a decision where we want to be in five, 10 years at Summit Park.
[00:57:03] And I think we all have to be aligned in that. And so in terms of budgeting, right, there, there’s only so much we’re going to allocate. But I think we want to prioritize, we all want to do a ton, right? We’d never have enough time to do everything that we want to do, but as a firm, if we can prioritize where we want to invest our money and resources and time, we can have the best outcome.
[00:57:22] And I think to Bruce’s point, we invest heavily in our network and finding operating partners. And we have one that is great on the digital marketing side. We have two that build a large IT consulting firm that knows really all things digital transformation. And so we leverage their experience as much as we can.
[00:57:40] So when it’s a question of budget, we really tap into our network and try to find individuals that have experience that we can really learn from.
[00:57:50] Kjael Skaalerud: Awesome with that just five minutes after we’ll take it. I wish we could all clap for you all, but that’s not really available in the weird world we’re living in.
[00:57:58] Maybe one day, we’ll do one of these in real life. But thank you all again. Thank you everybody for tuning in. Hopefully this was useful in terms of followup we’ll send a recording out. Of course. We’ll probably send a survey. If you find it in your heart, two question survey, let us know how we’re doing.
[00:58:11] We obviously want to iterate on these and get better over time. And my email is Kjael looks like jail, at altvia.com. Jeff is Jeff at altvia.com. If we can be helpful, if you want to continue the conversation we live for this stuff, so we’re always a resource, but with that, everybody enjoy the rest of your day and have an amazing summer.