Anup Kumar Adlakha, Founder and CEO of PE Front Office addressed a session on “How Technology can facilitate VC investment Process to enhance operational efficiency” for virtual attendees at SAVCA’s (South African Venture Capital Association) Annual VC Conference 2021 held on November 15th, 2021.
Anup began by highlighting the key operational areas of the VC/PE Investment Process to show how technology can improve efficiency in many of these areas. On a high level, it includes areas like the fund-raising process, tracking investor commitments, managing investor relations, prospecting deals, managing due diligence checklist, committing to the deals, managing investment valuations, and maintaining quarterly reports to investors.
Quoting a recent survey by SAVCA in the South African landscape, Anup emphasized on the point that more than 95% of the VC firms use Excel as their primary tool for managing data, processes, and reporting. While few firms are opting for software options like cloud storage such as Google Drive, Dropbox, OneDrive, or separate accounting software, but these are separate solutions being provided by different firms.
Anup highlighted that since very few end-to-end solutions are available in the market, some VC firms use multiple solutions to manage overall investment process. On top of this, some Alternative Investment Management Firms are even using generic productivity tools like Salesforce for managing deals and investor relations, which are not tailored for VC firms.
Some of the challenges for the VC firms using Excel are the lack of real-time analysis or consolidated view of data, errors in reporting, concerns of data loss or security, limited data accessibility, and time-consuming data capture.
Anup further elaborated on how Technology provides many advantages for VC and PE firms. The integrated solution acts as a single source of truth that enables different teams to access the same solution, get a high-level consolidated view for easy reporting, and allows investors to log in and access information. Technology allows quick data capture and reporting, automate calculations and reporting, process standardization, secure data access and storage, access to information in real-time, and provide a tailored workflow for each VC.
Further, Anup took a deep dive into how technology is being used to enhance operational efficiency in key areas :
- Deal Flow – Capture the deals quickly and easily via webform, email, and mobile and customize deal stage and due diligence checklist as per different VC requirements.
- Investment management – Once VC invests in a deal, technology helps manage multiple investment tranches through different instrument types like equity, convertible loans, debt, different kinds of debt.
- Portfolio monitoring – Technology helps track custom Financial, KPI, ESG, and checklist parameters for each portfolio company and provides a consolidated view across the whole portfolio. Using technology, VC firms can issue self-service login for portfolio companies to upload financial and KPI data, and generate automated quarterly performance reports for investors.
- Fund Raising – On the investor side, technology helps manage the complete fundraising process and track investor meetings, related notes, investment commitments, and multiple funds closures. Investor data rooms make it easy to exchange documents without the need for physical signatures.
- Investor Relations Management – Once the investor is onboarded, they can view their real-time investment performance such as IRR and NAV, Capital Accounts Statement, and any communications.
- Investor portal – Technology allows quick and easy investor onboarding and provides a centralized repository for all Investor documents.
- Fund Administration – Technology helps generate automated Distribution notices, capture fund costs, provide a consolidated view of all Investment cashflows and valuations, and automate calculations of performance parameters.
Wrapping up the discussion, Anup emphasized that technology plays an important role in enhancing operational efficiency of VC investment Process and look forward to increased technology adoption in Alternative Investment Management industry.
To watch the complete session – Click Here.