Follow me

Venture Capital and Private Equity Funds’ Use of CRM



Paul Greenberg just posted a summary I wrote of how private equity and venture funds are using CRM at his blog. I’ve cross-posted it here:




Paul asked me to write a brief summary of the findings of my research on Best Practices in Private Equity and Venture Capital Deal Origination. Unsurprisingly, effective use of CRM is a major focus of our research. We’re also particularly interested in the use of Web 2.0 technologies. I’ve summarized below the highlights of what we’ve learned so far.

This has been a fascinating research project for me, as it has given me the chance to talk with over 125 professional investors about how they find attractive companies. Particularly in an environment in which so many companies are seeking capital, I think it’s helpful for entrepreneurs to understand how the sellers of capital (investors) seek out the buyers of capital (entrepreneurs).

Get invites to exclusive events, jobs, and research.


For background, a few years ago I co-wrote a book called The Virtual Handshake: Opening Doors and Closing Deals Online, which was the first book about how businesses can use online networks to originate deals, raise capital, win new clients, recruit star employees. My focus was high-touch professional services: investment banking, private equity, venture capital, law, and so on.


Last year, I decided to launch a research study narrowly on the topic of Best Practices in Private Equity and Venture Capital Deal Origination. We plan to submit the article to the Journal of Private Equity (part of Institutional Investor). You can see the slides from some presentations I’ve recently delivered on this topic at . My coauthor is Chris Farmer, an alumnus of Bessemer Venture Partners and the private equity group at Bain & Co. We have interviewed over 125 private equity and venture capital professionals to date. I’m very lucky to have someone with Chris’s blue-chip experience working with me on this project.


One striking finding is how many vendors exist focused on this sector. We presume this is because many vendors saw institutional investors as a high-profitability group of least until the econalypse. Some of the platform vendors we’ve identified: Accounting Frameworks; AnalytX; Angelsoft; Burgiss Group; Davigold; eFront; Equitytouch; FundCount; LexisNexis Interaction; Netage Solutions; Relevant Equity Systems; SS&C Technologies; Sunguard Data Systems; TheNextRound; and Vitech Systems Group. We’ve also identified numerous consultants with a strength serving this community, including but definitely not limited to Business Management International; Infinity Info Systems; and NSK Inc.


In our survey, the most popular CRM platforms appear to be, Act, and SalesLogix (in that order). We should also highlight, which is by far the leading deal-tracking application for the angel network community, and has now added several dozen venture capital clients.


It’s a truism for most professional services firms that they should have a global CRM system. But, a striking finding to us was how many large financial services firms lack one. Carter Hinckley, Director, Strategic Accounts, Infinity Info Systems observed, “Financial services firms may think they don’t need a global CRM system for several reasons:


Compliance. It’s difficult for compliance reasons to give everyone in a firm access to all information.


Politics. Each individual group is often hesitant to share data. For example, an M&A banker might worry that the private bankers would hurt his relationship with a key CEO client.


Budget. Individual groups are usually set up so they’re hesitant to pay for any firm-wide initiatives.


Process. The sales process in many financial services firms often varies by area, rather than being homogeneous across the firm. Either there’s no formalized sales process, or it varies by group. In either case, automation is challenging.”


We interviewed a number of prominent funds who admitted that they had weak use of their CRM system, if any CRM system at all. The #1 most commonly stated reason was time; many professionals felt that filling in data on a CRM system was a distraction from more value-added work.

CRM vendors with whom we’ve spoken have voiced similar concerns about this client group. Ray Haarstick of Relevant Equity Systems observed, “Not enough venture capital/private equity firms use technology to track their deal flow. The last team to leverage technology is often the deal team. They have quite a bit on their plates. Finding deals and growing the value of portfolio companies is time-consuming, so unless they see an immediate payoff to logging and analyzing their deal due diligence in a system, it will be hard to get the deal team to commit to tracking more than a handful of data points. Relevant’s approach is to give them comprehensive, user configurable screens that minimize the amount of time required to track investments. Another key initiative is to extend the data capture and review of deal data to handhelds like the Apple iPhone. If it is easy to enter and access data, deal makers are more inclined to make use of technology.”


Hinckley emphasized the importance of creating value-add for the user. The system has to immediately create value for the user, or they’re prone to not enter data into the system.


Tim Lasonde, CTO of Equitytouch, observed, “What we are finding in the market is that the paradigm shift to the web 2.0 and collaboration mentality is hitting the alternative asset community last (slower). Associates are asking for it, but partners don’t see the value yet. There is also still this fear of having data in the cloud; however, this objection is becoming less common as more companies adopt cloud services.”


There are a number of questions we are continuing to investigate. We would welcome input from readers on these issues, and are happy to cite the
most insightful comments in our research:


Are you aware of a current, thorough, and neutral buyer’s guide to CRM systems for institutional investors? We may have to write it if we can’t find it.


What data sources do investors find most useful to integrate with their CRM systems? Among the names that have come up: Money Market Directory and Nelsons.


What are best practices in implementing CRM in a CRM-resistant culture?



Professional investors are now spending a large amount of time on public social networks (LinkedIn, Xing,
Facebook, Plaxo, etc.).
What is the best way to integrate that data and activity into the corporate CRM system?



Why are financial services professionals typically resistant to sales process formalization and CRM systems, and how can those objections best be addressed?



Lastly, what advice would you share with our audience: professional investors trying to use CRM systems in an optimal way to enhance their deal origination efforts?



You can contact us at .

Get invites to exclusive events and research.

Discuss On Twitter