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The definitive guide to CRM for venture capital

Customer Relationship Management (CRM) software for venture capital (VC) firms is the foundation for how investment opportunities are found and completed. Bringing together the firm’s complete relationship network, with the ability to manage deals, VC CRM platforms can have a material impact on the performance of any fund or partner. 

According to Gartner, CRM software is now the highest-grossing software market in the world. However, the traditional CRM solutions are primarily designed for high volume, transactional selling, not the sophisticated, relationship-driven deal-making of VCs. 

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What are the unique requirements of a CRM for venture capital?

A Customer Relationship Management platform is designed to increase your effectiveness as a firm by helping automate, standardize, and optimize your deal-making process. All the while helping you make the most of your relationship network in a single platform that contains your most valuable data. A venture capital CRM then must meet some highly-specific requirements to be effective, including:

  1. Supporting pipeline management. VCs maintain a pipeline of sophisticated deals that differ from the transactional type that are managed in traditional CRMs.
  2. Leveraging a complex network of relationships. Making the most of the firm’s relationship network drives the identification and progression of investment deals.
  3. Automating the tracking of a high volume of interactions. A high degree of automation reduces manual data entry and management required to capture the large volume of interactions that drive investment deals forward.
  4. Easing collaboration. Venture capital firms have to be able to easily communicate and manage the status of deals with GPs, LPs, and other stakeholders.
  5. Ensuring adoption. A great user experience ensures that every member of a firm adopts the CRM as their system of record, replacing the manual notes, spreadsheets, and email-based workflows they use today.

These requirements call for a CRM that builds on the core capabilities of managing deals as well as interacting with—and creating contact records for—people and organizations. This means that each of these requirements has to involve technologies that provide:

  • High levels of automation for efficiency
  • Relationship intelligence insights for additional context
  • Easy collaboration for team-wide adoption and visibility
  • In-depth analysis of deal pipelines and activity for optimization

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Let’s explore the advantages of having a CRM built for the unique workflows of venture capital in more detail, starting with the most valuable data that you should be tracking in your CRM.

How a CRM  for venture capital supports your deal workflows

As we mentioned above, a venture capitalist’s CRM is more than just a place to store names, phone numbers, and email addresses. It's a centralized platform for your entire firm's deal flow pipeline—including every person, organization, and opportunity. Here are some of our insights, based on our experience working with hundreds of VCs, about how the best firms use their CRM software for deal and network management.

Deal flow data management

A survey conducted by Blue Future Partners found that the biggest reason a VC firm may evaluate a new tool for their team is to improve their ability to find and close deals (59%), so how can a VC meet this need with a CRM?

if you plan to increase your tech stack, what are the key motivations behind that? "improve ability to find and execute deals (59%), helps in manaing the portfolio and internal processes (31%), helps in marketing the firm to LPs (31%), helps in marketing the firm to founders (22%), LPs had specific requirements which we need to fulfill (9%).

Creating, tracking, and managing deals

Tracking deals from pitch to close can be a complex process, especially if the data is stored in multiple locations like spreadsheets, email, note-taking tools, etc. Venture capital CRM software is built for teams that are reviewing thousands of opportunities per year and invest in fewer than 1% of them. A CRM gives your team the ability to monitor all activity related to every deal at both a micro and macro level. 

There are three key aspects to how VC’s get the most from managing their deals in a CRM:

  1. The ability to instantly see all the deals they are working on in a single view, with the ability to drill down to see all the detail on each of them
  2. The ability to show, communicate, and manage those deals visually
  3. Every status and communication related to each deal is automatically captured and enriches the deal record

For VCs managing so many deals, it’s critical to have multiple ways to view those deals. A list view offers a comprehensive perspective of the most important details of a full deal pipeline. Customizing this view, including specific data columns, provides insight into relevant industries, reasons that you may have passed on a deal, or a prioritization system so you can flag your most valuable opportunities.

Meanwhile, Kanban-style board views provide a macro perspective of the deal pipeline itself, showing each deal in the standardized pipeline stage used by your firm. This provides the opportunity for team, GP, and even LPs to review the deal pipeline and instantly update statuses.

Standardizing your deal flow pipeline

With your relevant data automatically logged in one place and everyone relying on a single platform, you can create reliable, standardized systems and repeatable processes. Repeatable processes turn to repeatable successes and create a strong foundation for your firm to scale. In “Break the Bad Data Habit” Harvard Business Review says that “there are two interesting moments in the lifetime of a piece of data: the moment it is created and the moment it is used.” 

There are two interesting moments in the lifetime of a piece of data: the moment it is created and the moment it is used. (Harvard Business Review, 2012)

 

Relying on a CRM that automates data capture, you can be sure the moment that data is created is accurate. Creating standardized processes with that data ensures it’s also accurate when it’s put to use. Teams that rely on spreadsheets or manual CRMs often end up with unorganized data

Keeping opportunity data organized can include custom fields—such as LPs and other firms involved in the investment or deal stages unique to specific industries you serve. The scope and detail of the fields should be customized to your firm's workflows. Automated data updates to related fields can ensure that multiple team members are not engaging the same opportunity or that you’d already passed on a previous opportunity that was not properly documented. 

For each of those thousands of opportunities managed by a VC firm, there are exponentially more people and organizations connected to them. Let’s take a look at how CRMs help you manage your relationship network.

Relationship and network management 

In addition to managing your deal flow pipeline, a CRM designed for VCs must take into account the relationship-driven nature of deal-making. The thousands of companies, names, email addresses, and phone numbers that connect you to individuals in your network are currency for your team. 

Each member of your team is in touch with founders (for both existing portcos and potential investments), other investors, LPs, and a wide range of other consultants that they’ve amassed throughout their career, and they all need to be nurtured over time. Your relationships with specific companies obviously aren’t as personal as relationships with the people in your network, but your CRM should be flexible enough to manage both the overlapping and unique attributes of either.

People data management

Traditional CRM platforms are, at their core, built for contact management. When every member of your team is manually entering and maintaining their own data their way though, these same platforms can quickly become bloated and filled with dirty data. 

A venture capital CRM goes beyond storing contact records mapped to accounts and turns them into a network asset that makes it easier to use the data you have to take action. Automated data entry and enriched data sets provide greater context around existing connections, and syncing this data across the team opens the door for new relationships, connections, and, eventually, opportunities. 

And contact information is not the only aspect of people management. A VC’s CRM software should provide as much context as possible and include a wide range of data relevant to an individual including:

  • Any meetings your team has had with that contact
  • Last date of contact
  • Related companies
  • Related opportunities
  • Their relationship with other contacts in your network
  • Other relevant custom notes (e.g. where an initial introduction was made, whether or not they’re married or have children, hobbies, etc.)

This valuable data can easily go missing when every call or contact is logged in a spreadsheet or jotted down on scrap paper. Unique privacy tools built into venture capital CRMs also give you the ability to keep select data private when necessary. 

Most importantly, consolidating everything in a CRM means there’s never a gap in institutional knowledge if one of your team members moves on to another company. This data must be captured in ways that align with the specific security and confidentiality requirements of your organization as well. For example, GP email communication with LPs can be logged for transparency, but the contents of the communication do not have to be shared with teammates.

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As you enter more and more data on individuals, it’s equally important that you use your CRM to track company-level data as well.

Organization data management

When you find a potential investment opportunity there are countless variables that affect whether or not you choose to invest. On one hand, your ability to work well with the founders of a company is a cornerstone of an investment, but you’ll also need to track all of the information relevant to the company itself. 

With a CRM, you can easily tie all relevant contacts back to a single organization while also tracking all of the intelligence about that current or potential investment target at the organization level. A venture capital CRM should work with your team to improve your existing organization-level data in the same way it does with people. Organization-level information can include:

  • Current funding round
  • Revenue
  • Total employees
  • Industry
  • Founding year
  • Source of introduction to the company
  • Contacts at the organization or otherwise related to it
  • Opportunities with the organization

Even if you’ve previously passed on the organization, retaining a consistent record in your CRM means that if you revisit the deal later, there is a thorough record of your contact history with the company. A note, for example, may reveal that you passed because the founders did not have industry experience.

A few months later, as they’re approaching their Series C, they’ve brought on an industry expert as their COO and their team is continuing to grow. Now you can get ahead of the competition because you already have an inroad, and you have a record of all of their relevant information and your history with them.

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Managing people and organizations in a single place removes communication barriers and eliminates the chance of overlapping work with your team by providing real-time updates and context. But what is the point of that data if you aren’t leveraging it to meet your business goals? Let’s dive into how you can utilize your CRM to drive success.

Key requirements for successful CRM deployment

If venture capital CRM software is all about improving existing workflows, it’s important to take a step beyond how the data in your CRM makes deal management and network management easier, and reflect on what technologies are available that enable your success and support making improvements to your team’s performance and processes.

Venture capital CRMs are unique in how they support your business’s growth.

  1. Automated data management surfaces your historical communication activity for all of your contacts and continually updates that deal and relationship data.
  2. While the CRM handles data entry, you can focus on standardizing workflows for deal and relationship management.
  3. Consistency in your process leads to improved visibility and collaboration across your team.
  4. Built-in data visualization tools empower you to analyze and optimize your processes even further.

Let’s take a more in-depth look at how to effectively maintain quality information, gain new insights, and turn those insights into action with your new CRM.

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Automation

Your CRM is only as valuable as the data you add to it. Forgetting to log a call or email today can easily lead to another member of your team reaching out to a prospect that you’ve already reached out to. You’ll use more of your team’s time and leave the prospect with the impression that your firm is unorganized. Automated data entry makes sure that your data is clean and current, so you can focus on driving deals. 

Automating data entry by ingesting engagement activity such as emails, attachments, and calendar events can save your team an average of 188 hours per year and ensure the right steps are taken as your deals progress. This includes retroactively surfaced interactions going back to the beginning of your inboxes, so even historical information is accounted for in decisions made tomorrow.

...automated data entry tools are only 33% of the cost of less-efficient manual data capture...(Goldman Sachs, 2018).

Manually entering and maintaining data in spreadsheets or other, bulkier CRMs creates systems that are inefficient and can go unused. According to a 2018 study by Goldman Sachs, however, the costs of automated data entry tools are only 33% of the cost of less-efficient manual data capture costs after accounting for labor costs and any errors in the data. Automation is cheaper, more widely adopted, and more efficient—the quintessential venture capital technology solution.

With all of your team’s network data together in one place automatically, you can rely on relationship intelligence tools to augment and enrich your existing data as your database grows.

Relationship intelligence

Relationship intelligence tools offer new insights that lead to new connections in your team’s shared network. Smart algorithms can measure relationship quality and lead to warmer introductions, and data enrichment provides additional context around people and organizations.

Relationship scoring takes the guesswork out of outreach by quantifying just how well you know contacts in your network. These values are generated based on previous interactions and mutual connections. Sourcing based on actionable data points is much easier than sending out cold email after cold email, and team members can source new leads spread across your firm’s collective network rather than being limited to their own contacts.

Automatic data enrichment fills in key data points at both the person and organization levels. Auto-populate data like job title and industry for your people lists. It will also fill in fields like location, industry, current funding amount, and AUM (assets under management) at the organization level without your team ever having to ask. 

While a CRM can’t replace your team’s networking and outreach tools, using a unified system that manages and supplements that network with the right technology increases collaboration and effectiveness.

Collaboration

Standardizing your data entry processes opens the door to a more collaborative, open team environment. Partners and associates at your firm can more frequently work deals together by sharing a single contact record. Automatic data entry and updates guarantee cross-team adoption so no data ends up isolated in a distant spreadsheet somewhere.

You can take this collaboration a step further by integrating your venture capital CRM software with other tools you already rely on. Here are a few ways your CRM can work with your existing suite of programs:

  • Push an update from your CRM to your firm’s collaboration tool such as Slack or Microsoft Teams 
  • Sync your CRM files with your cloud storage
  • Enroll contacts from your CRM into relevant mailing lists in your bulk email tool

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When your team is on the move, mobile applications can further increase collaboration in a remote and hybrid workspace. Being able to call or email directly from your CRM’s app and then reviewing that data from your computer before your next meeting makes tracking relationships seamless. Once these processes are in place, you can visualize your firm’s collective data to more clearly review your entire network and deal flow processes.

Combining this data with analytics tools, like Affinity Analytics, gives you the ability to easily review your pipeline to identify places for improvement. In our next section, we’ll dive deeper into analyzing and optimizing the processes outlined so far based on your unique measures of success.

Analytics

By visualizing your deal data and relationship data, you can more easily identify and evaluate patterns in your deal flow pipeline. For VCs there are three major opportunities to use CRM data to analyze your processes and drive improvements in investing activity:

  1. GP and management-level inspection and discovery of partner’s or fund-level deal pipeline and activity
  2. Individual partner and associate activity review for both deal pipeline status and activity KPIs
  3. Firm-level reporting for external stakeholders such as LPs

Since these analytics dashboards are directly integrated into your CRM you can do away with having to export and manually manipulate data to understand the complete picture of your deal flow pipeline and how you’re progressing toward your goals. With this view of your data, you can create a consistent cycle of improvement by iterating on and scaling systems that help you close deals.

Below, you can see two key charts to review deals by source (both by state and by sector), so you can determine and reflect on where your deals are coming from.

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Gaining a clearer understanding of which deals aren’t moving forward and understanding why they aren’t moving forward means you can deploy capital faster, invest in the best opportunities in your pipeline, and repeat. 

The power of a CRM for venture capital

Relationship and deal data management seems straightforward: keep track of contact information, follow up on your prospects, close deals. The reality is that maintaining your team’s vast network of contacts and opportunities can quickly become unruly without clear alignment around consistent, efficient processes. Generally, CRMs are powerful data management tools, but venture capital CRMs are designed to simplify and optimize your investment management process. 

When you have clean, automatically logged deal and relationship records available, you can utilize your team’s collective data to make more informed business decisions. These decisions impact both internal processes and external deal and relationship management that all culminate in scaling and improving as a unit, so you can close more quality deals faster. 

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