Sat. Dec 3rd, 2022

Over the years, the blistering pace of private equity funds is growing manifold as high returns and perceived low volatility continue to drive inflows from both existing and new institutional investors. Even during the pandemic, the PE-VC investments reached approximately $70 billion and were buzzing with frenetic deal activity and a complementary acceleration in exit momentum. In coming years also, formidable growth is anticipated in private equity (PE) and various factors are responsible for this acceleration but one factor that stands out among all is – leveraging the technology to add more value to fundraising. Technology is already effectively streamlining the investment life cycle and improving operational efficiencies, however, fundraising is another critical area where technology can play an active role in moving private equity towards further digitization day by day.

Several larger private equity firms are active in fundraising mode now and are projected to meet their fund goals. But the red flags of recession and other market disturbances can seriously elevate the peril of raising capital, that’s where automated workflows step in and streamline the entire process to ensure that capital is being managed efficiently by PE firms.

Advancements in disruptive fundraising software are empowering the investor relations team with the tools that help them to map investor preferences, maximize opportunities, and track progress, communication, and reporting. For funds undertaking fundraising activities, the software effectively helps in capturing the prospect pipeline which not only helps the fundraising cycle to be executed in a systematic way via very few easy steps on a single portal but also adds meters to the speed of the fundraising cycle.

Creating a better process for everyone

The fundraising process involves not only showcasing the fund’s own past track record (e.g., Net IRR, TVPI, DPI, etc.) but also differentiating from the funds that are competing in the same space. Such calculations not only need to be accurate but also need to be done at multiple levels – e.g., sector level, investment level, or fund level. By using software that offers industry-leading Data & Analytics capabilities, PE can not only generate such reports but also upgrade fund operations, and improve compliance, regulatory reporting, and communications.

PE/VC Fundraising is typically a communication-heavy process and involves a lot of human interaction. While subjectivity rules the process but the ability to present data objectively can help everyone in the process a lot. Technology can really assist in communication, collaboration, and capture of data digitally even if bigger and multiple teams are involved in the process. Tracking co-investor preferences and presenting the right opportunities to investors at the right time is something only technology can help with.

The amount of data created by PE firms is expected to reach 148 zettabytes by 2024, which can be extremely difficult to handle and analyze by only current traditional norms. The call for the inclusion of advanced technologies is not only a need but a compulsion. The private equity firms that are reluctant to digital transformation will soon find themselves in a situation where they will struggle to raise money and meet the compliance requirements of internal and external stakeholders. The way lies forward in leveraging digital technologies as part of an overarching strategy rather than opting for tactical investments to address operational challenges. As acceptance will benefit not just the PE industry but the entire economy in general and it certainly looks like private equity funds will continue shopping for companies in 2022 and beyond.



Views expressed above are the author’s own.


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