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The Modern Private Equity CRM: The 7 Must-Have Elements

Private Equity CRM

The private equity industry has progressed by leaps and bounds from the “good old days” of twenty or even just ten years ago. More assets are being managed, more firms are experimenting with new strategies, and models for diligence and operations have become more and more sophisticated. As things have progressed, the technology that private equity firms use to manage their investments and operations have grown more sophisticated in lock-step.

Few software solutions are more critical to the success of a private equity firm than its CRM (Customer Relationship Management) system. While PE may not have “customers” in the same way that CRMs were originally designed for,  private equity CRMs have become indispensable to funds of all sizes for tracking origination and deal flow, managing the due diligence process, and keeping tabs on companies in the portfolio.

Like other software solutions, CRMs have grown substantially more advanced over the past decade. In this article, we will explore some of the ways that CRMs are providing PE firms with more control and intelligence to help make better investments.

Email Integration

Back in 2011, a company called RelateIQ turned the CRM industry on its head: they offered integration into email inboxes as a native product feature. RelateIQ was later bought and rebranded to SalesforceIQ, only to be sunset a few years later. Still, its impact on the industry has been lasting: integration of email into CRM systems is now a standard solution for all modern platforms. In fact, the main Salesforce platform just added native email integration to its standard offering this year in 2020.

Email integration is critical for an investor to get a holistic view of their communications and relationship with executives, other investors, acquirers, and any of the other dozens of types of professionals that they must keep track of to be successful. One of the most substantial historical weaknesses of CRM solutions (particularly for PE firms) has been the manual effort required to keep records up-to-date. Email integration goes a long way to reducing that lift.

Horizontal Integration

As software solutions have proliferated and become more sophisticated, the market has reacted with some fatigue over the number and complexity of solutions. Getting junior investors to keep a CRM up-to-date is hard enough on its own; nevermind asking them to update separate limited partner and portfolio tracking systems. The industry has responded to this fatigue by integrating horizontally: offering more than simple CRM solutions as a part of a single integrated package.

One of the most commonly integrated solutions is portfolio management. If a private equity CRM is already tracking potential investments, it’s not much of a logical stretch to continue using the same system to keep tabs on investments after they’ve been made to capture the full lifecycle. These systems will typically integrate financial reporting, metrics and roll-ups for fund-level needs.

Similarly, many private equity CRMs are now integrating fundraising tracking, capital markets and investor relations. This is a natural extension of the CRM use case: tracking the fundraising process with LPs is not much different logistically from tracking a company for a potential investment from the firm. And similar to portfolio tracking and reporting, these integrated systems will often have functionality to help fund managers keep track of actual LPs, not just fundraising.

System Integration

As previously mentioned, the market has experienced a significant amount of solution fatigue as more software platforms have launched. One way modern systems are combatting this is through easier and more native integrations into other systems. Email integration is one example of that: the CRM has built-in code for connecting into Outlook, Gmail, and other email providers.

Interestingly, some modern CRMs are choosing to integrate with other CRMs. Specifically some providers are building their solutions entirely on the Salesforce platform. The idea is that many firms are already working with Salesforce today and may not want to undergo a full transition to another platform. So instead, they are layering on more advanced functionality on top of Salesforce’s base offerings to target capital markets management, track investment opportunities or otherwise better serve alternative asset classes.

Another interesting modern solution is the introduction of integration “brokers” such as Zapier. These online software solutions build out a wide variety of integrations into many systems and then allow those integrations to be mixed-and-matched to allow integration between two arbitrary systems. They also have an open marketplace for any software provider to develop their own integrations to and from the platform.

Workflow Integration

Another historical weakness of CRM solutions–particularly for PE firms–has been compliance and disruption to work. Unless the investor’s work is highly repetitive and transactional, it’s just typically not intuitive to open up a new program and go log some information once a day or so. To address this challenge, modern CRM platforms are building out substantially more workflow integration.

Another way to think of this advancement is “ubiquity”: CRM software is doing more and more to meet users where they work. One of the most common examples is the inbox: many CRMs now have Microsoft Outlook add-ins and Gmail extensions that sit alongside the inbox, layering in information at one of the most critical points where business is conducted.

All modern CRMs also tend to have robust mobile applications (for both iOS + Android) . This is particularly critical for investors who do a substantial amount of travel and transit for their work. If you’re on the road every day then it’s a foregone conclusion that you won’t be logging into your computer just to make a couple of updates in the CRM. If you can do so on your phone (perhaps even with some intelligent prompts), then compliance goes way up.

Native Reporting

CRMs have had some kind of basic reporting functionality for as long as they’ve existed. Unfortunately for private equity professionals, most of that reporting has historically focused on sales pipeline tracking rather than the slightly-different work of tracking deal pipelines or limited partners. As a result, firms have historically had to rely on the tool’s export functionality to then run custom reports in Excel and using custom macros.

That trend has begun to shift, as software solutions have become more advanced and started to focus more on the specific needs of the various investment markets. Integrated reports now focus more on the types of data that firms need: printouts of opportunities for weekly investment meetings, and lists of deal sources who need to be reached out to.  Some solutions have taken this further with automation – sending those reports to the firm on a regular basis.

Data Enrichment

It goes without saying that there is now an absolutely massive amount of data available for investors looking to gain an advantage in making investment decisions. Historically, that data has lived separately from the systems that investors use to actually track their investment processes. That has begun to rapidly shift with modern CRM software, in order to streamline data entry.

Now, more and more platforms are coming with pre-built integrations into systems like CapIQ, Pitchbook, Preqin, and Crunchbase. Through those integrations, real-time information about a company’s size, financials, and transaction history are all available at the click of a button in the same system that the opportunity is logged and tracked.

The advantage of this data integration is that it can bring in other data that investors might not always have time to find independently. That might include profiles for a prospect’s leadership team, a social feed of portfolio companies’ Twitter accounts, or enriched meta-data on your network’s skills and work experience.

Intelligent Recommendations

Some of the most advanced modern CRMs have built on the massive availability of data to begin making proactive recommendations to investors. These recommendations are often proprietary and run a wide range of domains.

One interesting set of recommendations revolves around building strategic relationships among your network. These recommendations might provide content to send to executives, flag thought leadership that a friend is putting out, or remind you to catch up with key contacts during your upcoming trip to Boston.

Recommendations may also focus on deals themselves. They can take into account your personal investment preferences and the deal sourcing approach of your firm, matching against publicly-available information about potential acquisition or investment targets. Of course, there’s no substitute for the hard work that every private equity professional undertakes for business development, but systems are beginning to take some of the more logistical work off of your hands.

About 4Degrees

4Degrees is a modern CRM solution specializing in relationship development and opportunity tracking for professional services firms, including private equity, growth equity, real estate and venture capital. 4Degrees specializes in the types of advanced functionality described in this article. If this type of solution interests you, don’t hesitate to reach out to learn more.

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