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Five portfolio management tips from venture capital veterans

Venture capital is often referred to as an apprenticeship business because so much important learning comes from day-to-day experiences. Yet, as an article published by the Business Development Bank of Canada (BDC) explains, you can shortcut the learning process by learning from experts: “Your learning curve can be shorter—and your results better—if you learn from pros who’ve already mastered key … ... read more

Relationship Management Venture Capital

Why all venture capital firms need a CRM

By Rebecca Hinds

The CRM market is the fastest growing software market in the world—and for good reason. The average return on investment for a CRM system is about $9 for every dollar spent. So, it’s not surprising that CRMs have become ubiquitous in many industries, including venture capital. Here’s a look at how CRMs offer a key competitive advantage. 

Getting organized   

As I’m sure you can attest, VCs can receive on the order of 5,000 emails each month, it’s nearly impossible for you to manage all of those relationships in your head. Which means it has to be documented, but that documentation can be scattered and leave you searching for data dispersed across various tools and members of your team.

CRMs are essential for providing a single source of truth and helping keep you up to date and organized on the relationships that determine your success. Justin Label, a seed-stage investor at Inner Loop Capital, recently tweeted

Given the vast amount of valuable data generated by VCs in their day-to-day work, especially when connecting with founders, VCs can’t afford to lose data or generate bad relationship data.  Getting organized with a CRM allows your data to work for you by providing a hub of current, accurate information that can be used reliably for planning, communicating, and scheduling.

Building long-lasting relationships 

The best VCs see every interaction as an opportunity to grow their relationships with their portfolio companies and partners. More and more, today’s entrepreneurs and founders are prioritizing finding a venture capital partner who they can trust and who will be a long-term partner. Eric Paley, a Partner at Founder Collective, announced the new addition of their newest Founder Partner and spoke to the importance of these long-term connections.

One of the swiftest ways to lose the trust of someone in your network is to drop the ball on a relationship. This happens all too easily when you don’t develop a consistent communication cadence. It can also happen when you reach out with old or conflicting information. All these relationship faux pas can be avoided through the use of a CRM. Being thoughtful and genuine is a lot easier when you have fingertip access to who’s been involved in the conversation to date and what key information has been shared over time. 

Spending your time on value adds

James Wise, a partner at Balderton Capital, a European VC that invests in European-founded tech companies, recently tweeted about his annual pipeline stats

These stats represent the reality for VCs everywhere—most of your wins come from a very small minority of your relationships. The key question is which relationships are most valuable

The biggest value of a CRM for venture capitalists is not in the volume of recorded data (even if that is important) but the ability to leverage relationship intelligence within that data set. Each record in the CRM is more than a data point, it’s a piece of a relationship. Your valuable time should be spent building and supporting those relationships, not manually entering data. Leveraging automated reminders alongside the transparency that comes with an automated system, means that even fully distributed teams can all stay aligned on long-term deals.

Your plate is already full and you have a lot of data at your disposal. An automated CRM enables you to spend your time where it adds the most value. One of the highest-impact technology initiatives for a VC firm is investing in a CRM that automatically sorts out the heavy lifting involved in extracting the most value out of relationships. 

Relationship Management Venture Capital