By Kathy Zhao, Product Marketing Manager
Fund managers are operating in an extremely competitive environment as a result of record high levels of dry powder and capital overhang. Our latest PE Market Brief on Fundraising co-authored with Pitchbook Insights examines trends defining the past, present, and future of fundraising. We’ll take a closer look at how PE fund managers can digitize the fundraising process and use technology to gain an operational edge in this competitive environment.
The environment today is the fund manager equivalent of an arms race. According to the Pitchbook report, as of the end of Q3 2020, capital overhang for the PE industry reached $1.3 trillion – the highest level ever. The largest cohort of PE firms have hundreds of millions of dollars to deploy in the intense post-pandemic deal making frenzy.
Fund managers looking to raise capital in 2021, need to establish their competitive advantage and operational prowess and find untapped markets. PE firms need to court LPs like brand new customers, making their experience as allocators as efficient and seamless as possible. Proving out a differentiated strategy and demonstrating to LPs a practiced ease in reporting, logistics, accounting, and so on will help compel them to invest and reinvest.
In the coming months, fundraising will become even more like a shark tank. If the pandemic has taught us anything, it’s that technology can be the difference between a good and excellent relationship.
Despite this, according to our New State of M&A Report, only 10% of PE professionals believe that their company’s technology sophistication is high across the M&A process. This reflects many pain points that GPs experience as they navigate fundraising. Creating a clean and consistent experience for LPs from fundraising to close and reporting is necessary to nurture relationships. For prospective investors, they should access key documents of new funds via a central document repository. Leveraging new technologies such as AI, blockchain, & Big Data can optimize the deal process.
Technology can help facilitate cross-functional collaboration during fundraising and help your team save time to focus on building industry relationships.
Based on extensive conversations with leading PE firms around the globe, Datasite recommends the following three steps to help improve the efficiency of the PE fundraising process.
Having prospective LPs’ contact information in one place and segmented based on the investment opportunity and fund strategy can be a gamechanger. Deal teams, investor relations, advisors, and placement agencies should work together via a centralized tracker.
Add documents to an intuitive repository, equipped with OCR text search to ensure smooth investor navigation. Leverage AI to automatically categorize thousands of documents in minutes. Having an effective operational edge will give you an advantage in the competitive fundraising environment.
If you find your team spends a lot of effort and time sending email communications to LPs, think about leveraging a deal marketing technology platform to automatically help you create custom communications. Bulk redact sensitive information and data in seconds to ensure GDPR/CCPA compliance. Instead of drafting and sending email communications one at a time, using a platform will give you and your team hours back in your day.
Utilize customized analytics that help you stay on top of your deal with interactive dashboards that track milestones. Knowing which LPs or third parties have accessed documents will be critical to help drive better processes. Activating this information will enable you to plan follow-up conversations and talk tracks to LPs. Additionally, getting insights from data across all deals will paint a better picture of your go-to-market efforts, team oversight, and current market dynamics, and provides more clarity for future fundraising rounds.
With Datasite Outreach, you can do all of the above.