By Anup Kumar Adlakha, Founder & CEO, PE Front Office
Many of the leading technology companies today have at some point of time in their history been funded by private equity and venture capital firms. This heavily underscores the fact that Alternate Investment Funds are aware of the strategic importance of technology; both as the driver of business growth and the extent to which it can transform businesses. Yet, many of them have not been keen investors in technology solutions to develop their own internal processes. In their quest for success, many firms have, , continued to rely on human intellect and effort with minimum optimisation of cutting-edge technologies.
A PE or VC firm generally utilises numerous Excel applications and access databases that contain actual cashflows, expected cashflows, valuations of different investments running through various years and quarters. In this business of managing investments by AIFs, it is imperative for IT to operate seamlessly in the background to support the organization.
However, there could be various reasons behind firms not opting for technology solutions. These primarily include concerns around data security and integration needs with other in-house systems (data as well as documents). To resolve this situation, several alternate asset industry (PE, VC) software vendors now offer cloud services (SaaS) to run both the front and back-office operations not only in a secure manner but also they provide out-of-the-box integration options with a plethora of 3rd party systems/services.
Amid the exponential technological growth, these SaaS providers are building scalable services on top of robust and secure PaaS platforms like AWS, MS Azure etc. These SaaS solutions are extremely modular as they enable firms to buy (license) the specific services that they need, such as: CRM; fundraising; deal management; fund accounting; fund management; reporting; analytics; investor portal; and portfolio management. Funds no longer have to resort to a big-bang approach and can easily migrate to these systems in phases.
“Other than the basic features, what really differentiates a good SaaS solution from other run-of-the-mill solutions are features like – Ease of configuration, Support for complex fund structures, Ease of use (minimal training), Mobility (being available on mobiles and tablets), Customized Reports and Workflows.”. With fund managers desiring greater control on what information is provided to stakeholders and in which format, the presence of such features in the technology solution can really help a fund to reach a higher level of operational efficiency, greater compliance, and adherence to new regulations. This will result in better support which in turn will assist in resolving more enquiries from investors to devise a constantly evolving investment strategy.
The urgent need for data accessibility from different locations over the last 18 months has strongly emphasized and accelerated the move from tools like MS Excel to new-age suitable SaaS solutions. AIFs are leveraging new technology and reducing costs by using such solutions not only for running their operations but also for maintaining key metrics of portfolio companies. SaaS solutions can adeptly integrate with the various systems of Portfolio Companies for gathering data and reports. This helps in lending transparency to firms as well as enabling real-time performance monitoring of their investments.
To conclude, some of the significant benefits gained by AIFs from using cloud-based applications (SaaS) include – Real-time accessibility from anywhere in the world; Reduced upfront capital expenditure; Faster implementation of systems; Paying only for what is used; High scalability and Higher uptime for the applications.
Needless to say, Cloud computing and next-gen SaaS solutions have taken almost every industrial sector by storm. Therefore, PE and VC firms (and other AIFs) cannot afford to ignore it; more particularly the various small and mid-size firms that can avail ample benefits from the economies of scale provided by such solutions. These disruptive innovations can prove instrumental in minimizing overall administrative costs while ensuring data integrity and accuracy. This in turn allows the investment and fund managers to concentrate on the firm’s core activities, i.e., increasing productivity and profitability in the new normal..