How modern tech tools are helping investment professionals manage their deal flows and portfolios better
CXOToday has engaged in an exclusive interview with Atul Arora, Managing Director of Equipped AI.
- What is the state of technology adoption among VC and PE firms?
The private investment market is almost entirely driven by the human-to-human contacts, which had proved to be a significant barrier in its technology adoption until recently. An overwhelming majority of professionals and asset managers take immense pride in their personal phonebooks and contacts – an evolution of the old-generation’s Rolodexes.
However, the pandemic has completely reoriented their approach to work with one of the key learnings being the benefit of technology in complementing the basic human tasks. Today, General Partners at many VC, PE and other private investment firms have realised that the level to which technology is allowed to permeate the investing ecosystem is ultimately a choice they have to make. This realisation has allowed for incremental adoption of point solutions (such as CRM modules).
While there still is reluctance in some cohorts to the adoption on technology even in silos, we believe that the growing downward pressures on management fee is eventually going to coax most investment houses to embrace technology as a means of managing their portfolios better.
- Are there any specialized software available for institutional investors like Venture Capital or Private Equity firms?
Most adopters of technology in the investment space have tried to customise existing CRM or ERP solutions for their needs, which have been limited to small parts or segments of the overall deal-flow process. Whether it is the fear of failure in implementing technology or the fear of loss of control over information – should technology take over – the fact remains that specialized software providers such as Equipped often see large non-investment software players in the market.
As an example, Equipped’s solution has eight modules that cover all aspects of pre-deal, post-deal and deal stage management of funds, assets and visualization of performance, along with AI-enabled trend analysis. Compared to this, generic or point solutions often focus primarily on the CRM and repository aspects alone.
- What are the advantages or benefits of investing in modern tech tools for these firms?
In addition to the significantly high levels of transparency that a specialized software can introduce in the deal-flow management process, there are several other benefits of using a well-designed software – including mitigation of the margin erosion in management companies. This in increasingly a major concern among VC and PE firms.
Then, a good software solution will help improve the fund accounting and reporting through enhanced analysis of a broad number of data sets. It will also help improve deal sourcing, and overall allow asset managers to exercise tighter control over portfolio performance.
- What are the biggest barriers to greater adoption of tech tools by these firms?
Private market investing is widely believed to be more of an art than a science and this phenomenon alone impedes wider adoption of technology, unlike in other industries.
The inertia associated with tech adoption can also be attributed to reluctance of firm partners and analysts to put their trust in technology to replace human connections. One of the most critical aspects of deal-making that is perceived to not readily lend itself to technology is relationship management. However, with the arrival of specialised platform solutions like Minerva from Equipped AI, there is no reason to believe that rudimentary tools like Excel sheets are the only option to manage and track relationships successfully.
- How is Equipped AI helping investment professionals or firms take full advantage of modern technologies?
Equipped AI is a B2B financial technologies (Fintech) company that provides solutions for the alternative investment managers to enhance their deal-flow management and data management. The company has its headquarters and sales office in the UK and its operations in India. The three-years old company is backed by AnaCap Financial Partners, a leading investment house in the UK.
Equipped offers three distinct solutions for investment professionals. The flagship solution is Minerva, which is the first end-to-end deal flow management system in the industry that caters to all requirements of the investment management industry.
Secondly, our Data Management solution and services range from data ingestion to visualization. We utilize the Microsoft Azure cloud to provide investment managers with a more granular view of their investments.
Thirdly, our Professional Services offerings for the buy-side include analytics, investment research, and business research services; which are designed to support asset managers who want greater analytical rigor in analysis and a deeper understanding of the markets.
- How can tools like Minerva help increase the value of the portfolios, or asset under management?
For starters, Minerva can help organise the entire contact base while still preserving privacy and confidentiality. Once Minerva is operationalized whenever an investment professional speaks to a prospect or exchanges emails with them, the AI in the system automatically catalogues and creates a profile of the prospect over time. The learnings of the past then come in handy once an asset in the portfolio.
Further, Minerva allows for granular analysis of variance and to determine the ESG score of the portfolio and its individual assets. In addition to tracking the returns of the investment versus the investment case, the variance analysis in Minerva can then provide suggestions for portfolio rebalancing: including which assets to sell and which ones to buy among the potentials in the database.
Overall, Minerva’s portfolio module can act as a sophisticated assistant to the deal manager, taking care of all the mundane tasks with value addition from the ability to provide intelligence.