Private Equity

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

Last Updated:
October 12, 2023

The private equity industry has progressed by leaps and bounds from the “good old days” of twenty or even just ten years ago.

Today, more assets are being managed, more firms are experimenting with new strategies, and models for diligence and operations have become increasingly sophisticated. As things have progressed, the technology that private equity firms use for investment management and operations has grown more sophisticated in lock-step.

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

Like other software solutions, the private equity CRM software ecosystem has evolved substantially over the past several years, from the basic contact management platforms of yesteryear to advanced cloud-based relationship intelligence systems.

It is important to remember that CRMs designed for sales teams to manage a linear sales process, such as Salesforce, Microsoft Dynamics, or Hubspot, are not ideal for private equity firms looking to build long-term relationships.

This article will explore how CRMs can serve as a single source of truth and provide PE firms with more control and intelligence to help make better investments.

If you are looking for a guide comparing the different private equity CRM vendors, including Dealcloud, Altvia, Dynamo, and 4Degrees, click here.

Email Integration

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 lasted: email integration into CRM systems is now a standard solution for all modern platforms. In fact, the Salesforce CRM platform just added native email integration to its standard offering a few years ago in 2020.

Email integration is critical for private equity investors to get a holistic view of their communications and relationships with executives, other investors, acquirers, investment banks, and any of the other dozens of types of professionals they must keep track of to be successful. One of the most substantial historical weaknesses of CRM solutions (particularly for PE and other investment 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 increased 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 complicated enough, never mind 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 entire lifecycle. These systems typically integrate financial reporting, metrics, and roll-ups for fund-level needs.

Similarly, many private equity CRMs now integrate fundraising tracking, capital markets, and investor relations modules. 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 the functionality to help fund managers keep track of actual LPs, not just fundraising.

System Integration

As previously mentioned, the market has experienced significant solution fatigue as more software platforms have launched. Modern systems combat this through easier-to-use and more native integrations into other systems. Email integration is one example: the CRM has built-in code for connecting to 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, are familiar with its user interface, and may not want to undergo a complete 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 modern solution is the introduction of integration “brokers” such as Zapier. These online software solutions build a wide variety of integrations into many systems and then allow those integrations to be mixed and matched to enable integration between two different 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–is compliance and work disruption. Unless the investor’s work is highly repetitive and transactional, it’s typically not intuitive to open up a new program and log some information once a day or so. To address this challenge, modern CRM platforms are building out substantially more workflow integration.

A similar 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 information at one of the most critical points where business is conducted.

The best private equity 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, it’s a foregone conclusion that you won’t be logging into your computer to make a few updates in the CRM. If you can do so on your phone (perhaps even with some intelligent prompts), compliance goes way up.

Native Reporting

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

That trend has shifted as software solutions have become more advanced and 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 – regularly sending reports and dashboards to the right stakeholders.

Data Enrichment

There is now a massive amount of data available for investors looking to gain an advantage in making investment decisions. Historically, that data has lived separately from the specific systems investors use to track their investment processes. That has begun to shift rapidly with modern CRM software to streamline data entry.

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

The advantage of these data integration capabilities is that they 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 massive data availability to make 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 send you a notification to remind you to catch up with key contacts during your upcoming trip to New York.

Recommendations may also focus on the deals themselves. They can consider 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. Still, CRM systems are beginning to take some more logistical work off your hands.

To learn more about how a relationship intelligence private equity CRM can help you drive deal flow and close more investments by leveraging the power of your team’s professional network, schedule a demo of 4Degrees or read our case studies.

About 4Degrees

4Degrees is a modern relationship intelligence CRM solution specializing in relationship development and deal management 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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