If you’re like most private market investors, you understand that deals don’t just happen on their own. Instead, they happen by building, managing, and scaling relationships.
Without careful organization, you and your team will need to spend more time on admin tasks and less time building relationships, and as we all know, this will affect your deal flow and, ultimately, the number of deals you close.
To manage your deal pipeline and stay on top of your relationship network, you need a relationship deal management platform that understands the unique workflows and nuances of the private market firms.
Unfortunately, many organizations still rely on spreadsheets and legacy transactional contact management or clunky CRM platforms with outdated functionality designed for sales teams selling a product or service, not dealmakers closing multi-million dollar deals.
Why should an associate at a private equity firm rely on the same CRM as a sales rep at an enterprise B2B organization if their use cases, pain points, processes, and workflows are entirely different? Granted, they are both focused on “closing deals,” but that is where the similarities end.
For your firm to remain competitive, you need to have the right processes and software in place, including an industry-specific deal management platform. This way, your team will have real-time visibility into your relationship network, deal stages, relevant metrics, and other important information in a single place.
If you’re still undecided about implementing deal management software for your firm, we’d like to help make your decision.
This article will correct some common misconceptions we hear about deal management tools.
Myth 1: Any CRM Will Do The Job
Customer relationship management (CRMs) are popular platforms for firms looking to track their sales process and organize their contact information. Still, most of these traditional or “horizontal” CRMs lack the functionality that you need to manage long and complex relationship-based deals.
For example, most traditional all-in-one CRMs are limited to contact management; however, as a deal maker, you are not focused on selling widgets or optimizing a sales pipeline; instead, you are focused on managing long-term relationships. This means you need a relationship manager that helps your team turn your data into insights that help build deeper relationships and close more deals.
You need more than a static contact database if you are running a venture capital, private equity, or commercial real estate firm. You need relationship intelligence; this includes insights into your team’s network and client interactions that help you source, manage and close more deals by leveraging your firm’s relationship networks.
Traditional CRMs focus on providing value to funnel-driven sales teams. On the other hand, a dedicated platform like 4Degrees was built from the ground up by investors who understand your sophisticated deal-making processes and more complex deal cycles.
A key feature of 4Degrees is using AI to determine relationship strength scores to find a path to a company or person via a warm introduction and explore more opportunities in less time. This is one of the multiple areas where a specialized CRM or deal management solution can add value to your firm.
Myth 2: I Can Do It All In a Spreadsheet
In the private markets, the journey from sourcing an opportunity to closing a deal often takes months and involves dozens of stakeholders from your firm and your relationship network.
This process can include hundreds of touchpoints in the form of emails, Zoom calls, in-person meetings, and numerous others. And yet, many firms still use spreadsheets to keep track of all those moving parts and manage complex deals. Unfortunately, relying on spreadsheets wastes time entering data and risks forgetting key details that can move the deal forward.
Since spreadsheets have been the norm for decades, many dealmakers have not explored superior solutions like a dedicated deal management platform that uses automation and relationship intelligence to close more deals faster.
However, it’s 2022, and relying on Excel is no longer enough for firms looking to remain competitive. Let’s explore some of the reasons why.
First, individuals are spending hundreds of hours manually entering data into spreadsheets. This tedious, monotonous task distracts dealmakers from other high-value work. Data entry is also prone to errors resulting in lost or stalled deals.
Spreadsheets are not collaborative documents; for example, users can forget to send the updated version, making it hard to know what information is correct—resulting in team members duplicating efforts instead of doing complementary work. Imagine how much money a firm wastes if the average deal maker earns over six figures and spends considerable time fixing spreadsheets.
If you wish to remain competitive by optimizing and automating the most time-consuming stages of the deal process, don’t be afraid to ditch the spreadsheet.
Replacing Excel with a deal management platform that automatically captures all the information spread across your email, notes, calendar, and spreadsheets will free up hundreds of hours and make you a more efficient investor.
Myth 3: Deal Management Software Takes a Long Time to Implement and Setup.
We’ve all heard horror stories of software implementations that take months or even years to roll out, go over budget, and suffer from user adoption problems.
So you might be thinking, “I rather stick with my trusted spreadsheets and other legacy systems instead of spending thousands of hours and dollars implementing a new deal management software.” That is a fair point; however, longer implementation times are usually the case with traditional CRMs and not with a deal management platform designed for deal-driven teams.
Most sales-focused transactional CRMs are used by multiple verticals or industries, each having different processes, workflows, jargon, etc. Additionally, CRMs are used by Sales, Marketing, and Customer Support teams. Each team, industry, and company is different, and as a result, the CRM needs to be customized by professional outside consultants with detailed expertise in the particular use cases.
On the other hand, 4Degrees was founded by a team of ex-investors familiar with your industry’s processes and workflows. In addition, our dedicated customer success team works exclusively with deal makers. This way, we can anticipate your firm’s needs and ensure we start delivering value from day one.
On the technical front, integrating with other systems you already use (virtual data rooms, email, calendar, etc.) eliminates some of the time it takes to migrate deal data and deal information and get your firm up and running in just a few days.
Myth #4: There’s No Return on Investment
At its core, when used correctly, an industry-specific deal management platform has a very high return on investment (ROI). Let us explain.
For most firms in the private markets, one of their most valuable assets and a key differentiator is the team’s relationship networks. Unfortunately, most firms are constrained by time and bandwidth, making it challenging to spend large amounts of time leveraging their networks. However, armed with a deal management platform with relationship intelligence, your team can activate their network and close more deals.
Let’s look at the ROI of a platform when it comes to deal sourcing. For instance, a private equity firm leverages 4Degrees to get a warm introduction that results in an investment of $200 million. Multiplied by a Multiple of Invested Capital (MOIC) of 1.7X can return an exit of $340 million. When applying carried interest percentages, $340M- $200M= $140M *20% of carried interest equals $28 Million amongst the partnership. As you can see, the payoff for a warm introduction can be very lucrative.
To see more ROI examples read the Hidden Value of Relationship Intelligence. Compared to the low per user per month pricing of most deal management platforms, the return on investment can be very high.
Myth #5: Deal Management Software isn’t Right For my Situation
We hear this complaint from many professionals who already have a straightforward workflow that works well. They are not interested in changing a process that gets the job done, so they aren’t willing to spend time looking at, let alone investing, in a new software tool that “forces” them to “change” their process. Even though implementing a deal management platform will result in tangible business benefits.
If this describes you, we don’t blame you. It would be silly to change a workflow that is already good at managing your deals. Change is hard to justify when you have a system that works. But the reality is that you are not changing anything by adopting a deal management platform.
Deal management software platforms, especially those designed for deal-driven teams, such as 4Degrees, seamlessly adapt to your existing processes.
You don’t have to change how you work, just the tool you use to optimize and automate that work. For instance, 4Degrees allows you to customize your deal flow pipeline with the stages and information that match your current workflow with just a few clicks. No need to hire expensive consultants or developers.
The right technology can automate tedious and time-consuming tasks such as data entry, while transforming your relationship network into an engine of opportunity.
Why 4Degrees is the Best Deal Management Software
4Degrees is an AI-powered deal management platform that streamlines your origination, due diligence, and deal life-cycle, helping you ditch the jumble of Excel spreadsheets and generic sales CRMs while focusing on what matters most – building relationships.
We like to say that 4Degrees is “built from the ground up for deal teams.” Tailored for the sourcing, relationship-building, and pipeline management activities that drive your firm. It saves time, eliminates data entry by syncing your contacts and meetings, and it mines your network for introductions to customers, talent, partners, and investors. Additionally, the 4Degrees mobile app packs all the power you need on the go.
Getting started with 4Degrees is simple: It integrates with the tools you already use, like Microsoft Outlook, Gmail, Dropbox, Excel, and 1000+ others. It also integrates with select CRM software to provide relationship intelligence alongside them, such as Salesfroce, HubSpot, and others.
Ready to finally dive into deal management software?