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Choosing a CRM? Here Are Three Essentials to Remember

A venture capital customer relationship management platform (CRM) is an essential tool for any team that wants to leverage its relationship network’s full potential. The best CRM platforms integrate billions of data points that can inform strategic decision making and help you manage your long-term business relationships. The ROI from a properly implemented CRM is significant, so the cost of getting it wrong is high. Here are three tips from prominent investment professionals to ensure you get it right the first time.

1. Consider Dunbar’s Number 

Uncertain as to whether or not your team is ready for a CRM? In his book The Holloway Guide to Raising Venture Capital, Andy Sparks details the value of CRM implementation in the context of Dunbar’s number—the theory that humans can only maintain relationships with 100 to 250 people at any given time. “If you work in an industry that demands a wide network, you’re likely to forget to follow up, lose someone’s name, and fail to meet the right people,” Sparks explains. “CRMs help us make up for this natural deficiency with external systems we can build and improve upon to meet our needs.” 

By outsourcing your memory to your technology, your team can focus on work machines can’t do: putting relationships at the forefront of customer relationship management.

As a venture capitalist with a wide-reaching network, it’s impossible to keep tabs on your many relationships and ensure that you do not drop the ball on the most important ones. Your team might speak with 100 or more founders prior to making an investment. Looking at that number with Dunbar’s Number in mind, you can see how easily relationships can fall by the wayside without a CRM to keep track of them. 

2. Select an industry-specific technology

As you set out to choose a CRM, make sure to choose a vendor that works with your industry. Your CRM vendor has to recognize and understand the unique needs of venture capital firms to help you implement a CRM that meets your specific requirements. Providers that understand the venture capital space will recommend technology that:

  • Supports relationship-driven deals rather than linear, transactional sales
  • Automates data entry so your team isn’t spending time on mundane, manual work
  • Provides insights into your business informed by complex, often AI-driven analysis of your relationship data

Marcin Zabielski, Partner at Market One Capital (MOC), faced what many venture capitalists have endured—having a CRM that didn’t provide the transparency his team needed to collaborate successfully while also dependent on manual data entry. MOC was relying on a transactional CRM—a tool built for managing one-off deals and annualized contracts—instead of one built for the relationship-driven nature of VC.

His team switched to Affinity because they wanted a platform that would let them focus on building relationships with prospects rather than the drudgery of data entry, and leverage machine learning to offer up insights that would have otherwise been overlooked.

3. Scrub your data

You’ve purchased your CRM, and now it’s time to import your historical information. Before you do, it’s important to keep an eye out for one of the most common pitfalls of CRM deployments: “dirty data.” Quoting Forrester research, Kyle Lacy, VP of Marketing at OpenView Venture Partners, says that 70% of CRM implementations fail because of bad data.

He adds, “Since I work at a venture capital firm, I get an inside look into many companies. I have to say that the number one issue for a lot of SaaS companies is dirty data. The only way that you can create a good experience for your audience is if you actually know who they are, and why they care about you. Without clean data, that’s impossible to understand.” 

Dirty data such as outdated phone numbers or email addresses, inconsistent formatting, or erroneous information can lead to lost customer insights; for a VC firm, that can lead to lost relationships and deals. When choosing a CRM, remember the “1-10-100 rule” of data quality, developed by George Labovitz and Yu Sang Chang, co-authors of Making Quality Work: A Leadership Guide for the Results-Driven Manager, in 1992—it takes $1 to verify data now, $10 to clean it up later, and $100 further down the line, as poor data leads to uninformed decision making that can result in missed opportunities. 

In addition, having inaccurate data becomes more and more problematic as you integrate your CRM with other enterprise systems. As Lacy explains, “You can have marketing systems that are functioning really well, and a CRM that’s functioning really well, but when you put them together they’ll break if the data cleansing processes aren’t set up properly.” Taking the time to invest in clean data ahead of time also will decrease your time to value, as clean information is more accurate, more precise, and gives you the power to make faster, more informed decisions. 

Unfortunately, venture capital teams that rely on disparate spreadsheets or manual CRM platforms can lose track of important data points even if the data is clean. And no matter how comprehensive their data is, the insights they’re able to glean from it are limited.

Your VC firm needs a purpose-built CRM that understands the specific needs of the VC world and will help keep your data accurate, up-to-date, and actionable. Affinity is a platform designed for deal-makers to find, manage, and close more deals fast. Schedule a demo with our team today, so you can leverage your business network’s full potential.

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