David Teten is an advisor to emerging investment managers and a Venture Partner with
HOF Capital. He was previously a partner for 8 years with HOF Capital and
ff Venture Capital. David writes regularly at
teten.com and
@dteten.
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Private equity and venture capital investors are copying our counterparts in the hedge fund world: we’re trying to automate more of our job.
When I was single, I registered for (a lot of) dating websites. When I met my now-wife, I realized that any technology that can
find me a spouse is a killer app. That’s why
40 million Americans use online dating sites. But, most of use raise capital and source deals the same way people looked for dates 20 years ago: networking at conferences (or bars).
Most of us want one spouse and we’re done, but in business, you want a lot of partners. I’d argue that the same type of technologies that have revolutionized
dating can revolutionize our industry.
In liquid markets, most of the calories expended on technology and analytics are focused on trade selection, or “
origination.” However, in private markets, there is more room to optimize across all 11 steps of the investing process. Below, I’ll walk through how progressive investors are using technology and analytics throughout all of their operations. To learn more about this space, I suggest joining an online community I co-founded,
PEVCTech.
1) Managing the firm
Before you can actually invest, you have to
manage your fund. This is harder than it sounds. In the private equity universe, most partners have primary training as deal-makers, not as managers. When I talk with junior personnel at private equity firms, the quality of firm management is a frequent complaint.
I’ve used
Asana extensively to manage activities firm-wide. I also use several living Google docs to maintain the minutes and the group agendas for my fixed weekly meetings. I use another live Google doc to maintain my database of companies I’m
marketing to other VCs. That Google document provides cut and pasteable text I can share with other investors, based on their stage, focus and appetite.
Other investors use
Trello,
Basecamp, and
Monday for making sure that everyone at the firm knows each others’ long-term OKRs and short-term projects. Point Nine Capital
uses 15Five for continuous employee feedback.
One aspect of management which merits attention is your own cybersecurity, which should not be left until a crisis to address. Small investment firms often have interns and entrepreneurs in residence passing through, each of which is a security risk. (See
A comprehensive guide to security for startups by Bessemer Ventures.)
2) Marketing
Kyle Dunn, CEO of
Meyler Capital, says “investors should focus on building a large audience within a CRM system (having the ability to categorize your different constituents); communicate consistently to that audience; and implement an automation platform that can leverage lead score to profile interest. It sounds simple; however, very few asset managers actually do it.” I agree.
Many tools designed for B2B marketing in general are also relevant to investors. I know of funds using
Constant Contact,
Goodbits,
Pardot and
Publicate to create light newsletters for internal and external consumption. A major angel group uses
Influitive, an advocate management tool, to track, activate and motivate their members. Other VCs use
Contently* or
Social Native* to create relevant content.
Meyler Capital is taking the analytical rigor of modern internet marketing and applying it to fund marketing.
Point Nine Capital’s
website is now
powered by
Contentful — it uses
Unbounce for
landing pages and
Typeform for surveys and other data collection. “We’re using …
TinyLetter for our
“Content Newsletter” … and
Buffer to schedule social media posts. Last but not least, we still use
MailChimp to publish our (in)famous
newsletter.” I also use Mailchimp for the
teten.com and
pevctech.com mailing lists. Point Nine Capital
uses Mention for media monitoring.
Teten.com is built on WordPress as my content management system.
I use
Hootsuite to coordinate my social media activity, which consists of Teten.com,
PEVCTech.com,
Linkedin,
AngelList, and (passively)
Twitter and
Facebook. I use Google Drive to host my
conference presentations, which are all embedded at teten.com. I use
Diigo, a social bookmarking tool, to keep a record of useful websites. I have also configured
IFTTT to share on Twitter anything new I post on Diigo.
Qnary is one of numerous tools which can help build out your team members’ virtual presence. A tool like
Quuu identifies relevant, shareable content to keep your social media channels active.
“There are two crucial aspects of marketing that investors often overlook: automation and analytics,” wrote Sabena Quan-Hin, Marketing Manager at
Flow Capital. “Automation allows you to spend less time on tedious tasks and will help boost productivity, especially within a small marketing team. At Flow Capital, we use HubSpot’s sequences and workflows functions to automate a bulk of our emails and internal tasks. This provides us more time to develop meaningful relationships with prospects and customers. We use Google Analytics, HubSpot, and LinkedIn Campaign Manager for the majority of our analytics. For our content creation, we use tools such as
Canva (graphic design) and
GoToStage (webinars platform) to create and share content for prospects to find.”
3) Raising capital
Tim Friedman, Founder,
PE Stack, said, “If I could offer one piece of advice to today’s managers, it would be to take the time to understand the demands of the modern institutional LP. Today’s investors are allocating more to alternatives in an environment where there are record numbers of new funds; and seeking deeper relationships with managers via direct and coinvestments. The past few years have therefore seen a huge rise in the proportion of LPs using specialized tools to manage and understand their portfolios, including platforms such as Chronograph, Solovis, Allocator, Cobalt LP, eFront Insights, iLevel, Burgiss.
The proportion of LPs using technology to manage their portfolios will continue to increase, and GPs unable to provide quality data to LPs will find it increasingly hard to retain and attract LPs. We are also seeing technology evaluation as an increasingly important part of LP operational due diligence. Excel and Google simply aren’t going to cut it if you expect to build a high quality institutional investor base.”
A more efficient approach to
fundraising than haphazard networking is to mine the data exhaust from the limited partner universe to identify those LPs most likely to find your fund attractive and focus all your energy on them. I previously posted a detailed presentation with
sales technology tools useful for B2B sales.
I always make a point of keeping firm records updated in the major data-trackers tracking the VC industry:
AngelList,
CB Insights,
Crunchbase,
Dow Jones VentureSource,
Pitchbook,
Preqin, and
Refinitiv Eikon. LPs, coinvestors, and press use these tools, so I work for free for these data vendors to make sure that their data about our activities is correct. This is a great example of why data businesses have substantial moats.
Boardex and
Relationship Science make it easier to understand and map social networks into potential limited partners.
Cobalt for General Partners helps GPs to optimize their fundraising strategy.
MandateWire and
FinSearches provide leads on limited partners with new mandates which might fit your fund.
Evestment is a platform for capital-raisers;
Evestment TopQ automates private markets performance calculation.
I am a heavy user of
DocSend, a secure content sharing and tracking platform that can be used to seamlessly share recurring materials with potential LPs. It provides analytics to track shared materials across target senders and improve the content for future leads. Point Nine Capital uses
Qwilr to create modern, mobile-native collateral.
Most funds open data rooms to share previous reports, performance data, pitch decks, legal docs and other fundraising material with LPs. I’ve seen funds using
Ansarada,
Allvue,
Box, CapLinked,
dfsco,
Dropbox, Digify,
Drooms,
Google Drive,
iDeals,
Intralinks,
Ipreo,
Merrill Corporation, and
SecureDocs for their Virtual Data Rooms. These same tools are used by companies raising capital.
I’ve also experimented with using services which are marketplaces between LPs and GPs:
CEPRES,
DiligenceVault,
FundVeil,
Harvest Exchange, and
Palico. Some funds are using technology-enabled intermediaries to help them sell to retail LPs, e.g.,
Artivest and
iCapital Network.
Deer Isle Group has built the
D.I.G. Beacon technology system, which automatically outbound-solicits a universe of over 10,000 institutional investors, without requiring LPs to register for an online network of funds.
Crystal guides you in how to influence a particular person, based on their online presence.
X.ai is a virtual assistant which can coordinate your fundraising and other meetings.