Even though Private Equity may come across as a more old-fashioned, connection-based industry that focuses on the financial skills of deal teams, there is no mistaking that innovation is becoming an increasingly essential element in how these firms choose to invest. For example, the most successful companies have realised that the era when you could organise your firm and investor relationships using only a spreadsheet has ended: in order to maintain the same success nowadays, several software tools are needed.
To remain competitive, Private Equity firms must have robust application program interface integrations between their deal tracking platforms and/or CRMs, portfolio management platform, and reporting software to satisfy complex regulatory considerations. Harnessing data, automation, and new technologies will be vital for leading PE firms when making decisions.
Going forward, Private Equity firms will face more and harsher scrutiny based on their digital technologies. Inefficiencies in operation quickly become noticeable, causing the operations team and LPs to feel frustrated. Firms relying on old, outdated legacy software will be passed over in favour of those offering sleek, easy-to-use platforms packed with benefits.
If Private Equity firms want to meet investors' expectations for consistent returns, they must get digital transformation right. This will make their operations more efficient and provide greater transparency and actionable data insights delivered to customers in real-time.
Although it would be beneficial for Private Equity firms to stay updated with the latest digital technology, some are slow to adopt new technologies. This is likely because those in charge often rely on pre-existing relationships and old systems instead of venturing into something new. PE firm leaders are frequently so bogged down with their daily task of raising money that they don't have time left to investigate data insights.
Outdated software solutions are a pain to use, and on-premises systems are no exception. With these kinds of systems, you may find that they're not being maintained as often as you'd like - costing your company time and money in the long run. Additionally, data mining opportunities and other key insights are regularly missed with outdated systems.
Therefore, firms should find technology that is easily configured and designed to meet their company's specific needs. With more competition in the market now, it can be challenging for PE firm leaders to understand how much markets are changing every day because of new technologies arriving. Technology will have a significant effect on a firm's opportunity for long-term success, so paying attention to avoiding common mistakes is critical.
In recent years, there has been a growing demand for platforms that can manage multiple challenges and offer accurate reporting to investors and regulators. The best PE platform technologies integrate with some of the world's most popular software applications (e.g., Salesforce or Dropbox). Therefore, it is crucial that the technology that is chosen to run your fund is able to prosper in an API environment.
Other important factors to consider are regulations and privacy. The regulation system for private investments is very complex, and it is necessary to ensure that everything is in compliance. For this reason, it is extremely important to rely on technologies that have been built according to the applicable laws and that provide fund managers, transfer agents, and investors with a safe environment.
By working with a single platform provider that has a professional services team, your firm can avoid worrying about the extra resources and complications associated with extracting value from data. Ideally, a platform's professional services team would be able to take care of everything related to system build, data migration, analysis, automation, etc.
The private equity sector has changed dramatically in recent years, and the next era of the industry will be defined by the technology solutions that PE companies select. Regardless of size, your organisation needs the ability to manage interactions, transactions, processes, workflows, and company compliance in a data-centric, automated, and secure manner.
Staying ahead of the curve in the digital realm is critical for any Private Equity firm that wants to stay competitive. Checking out new solutions and remaining updated on digital advancements will allow you to locate better deals, nurture investor interactions, amplify operational efficiencies, and construct unique selling points.