Why Investors Need Their Own Relationship Management System

And Why Most CRM’s Don’t Work for Corporate Development, Search Funds, Family Offices or Other Private Equity Deal Teams 

 

Does the world need another CRM product? Absolutely not. In the US alone, there are over 1800 CRM systems providers (up 15% since 2018). However, the vast majority of these systems are intended for sales and marketing teams. We believe that while the world doesn’t need another CRM system, it does need a new relationship management (RM) system; one that is designed to help investors (and investment teams) manage deal sourcing.

Note that we’ve dropped the ‘C’ in CRM. This is because nearly all of the CRM systems out there are designed to help manage customer relationships. Everything in these systems, from built-in deal workflows and pipeline reports, to the way the data is stored and the 3rd party integration options, is intended to help sales and/or marketing teams manage customers. 

As we know from our own investment experience, the needs of investors in corporate development (mergers and acquisitions), search funds, venture capital, family offices and even investment banking, are very different from that of sales or marketing teams. 

 

Investors Have Unique Needs

As investors and acquirers ourselves, our aim was to create an ‘engine’ of proprietary deal flow. We knew we needed a system to keep our deal sourcing activities organized and on-track to achieve our goals. In particular, we wanted to purchase an off-the-shelf product that enabled us to:

• Enter and store data in the context of investment opportunities, including things like: revenue by type (SaaS, licenses/maintenance, services, other), EBITDA, deal value (potential capital to deploy), target valuation expectations, industry category, opportunity source, deal status, etc.

• Track opportunities in our funnel according to our own deal process, including milestones such as: reach out, contact, NDA, LOI, DD, close.

• Securely store call notes and attach relevant documents provided by targets

• Centrally store our Basic Information Requests (BIR) and outreach scripts

• Easily create reports or views for our investors on the status of our search

• Bulk import or export opportunity information

Our Search for a Relationship Management System

In our search we tried many of the most popular CRM systems including the majors like Salesforce, Pipedrive and HubSpot. We also analyzed CRM-like options intended for investors, but they were far too expensive for us to even trial (we’ll do a separate post in the future on the investor CRM options we evaluated). We found them complicated to use and set up. 

As a small deal team, we couldn’t afford to spend thousands (or in some cases, tens of thousands) of dollars on a CRM system, especially when we were just getting started. 

The few CRM systems we did find that were designed for investors were quite expensive; probably because the vendors of those systems have assumed that investors want highly customizable, Enterprise-level products and are willing to spend a lot of money. 

In the end, nothing met our needs. 

The most popular off-the-shelf CRM systems were relatively affordable but for our use cases they felt like a hack. We were trying to make tools designed for sales and marketing fit our needs and it was awkward. 

Traditional CRM systems either didn’t have the functionality we needed or they required so much customization that it became a painful and time consuming project just to set up the system. 

Admittedly, some CRMs like Salesforce can pretty much be customized to do anything, but who wants to spend the time and money to customize it? And who has the time to manage the initial implementation and on-going maintenance of a custom CRM? 

All of this seemed like a distraction from our real goal of having a tool to help automate and improve the process of deal sourcing and relationship management.

Solving Our Own Problem

So we set out to build the relationship management product that met our own needs; something that worked for a fairly broad range of investors and small investment teams, with minimal need for customization. 

We wanted something simple that a small investment team could be up and running with quickly (in a matter of minutes), even if they aren’t tech savvy and have no IT staff to help them. 

Perhaps just as importantly, we set out to build a product that is low cost, so that investors have an option at price points comparable to the traditional sales and marketing CRMs but without the need for heavy customization and configuration. 

What We’ve Learned So Far

We’ve been talking to investors about their relationship management needs and we continue to gather feedback that influences our design and further defines our product roadmap. 

Interestingly, we’ve uncovered many desirable features for investors that we hadn’t thought of when we first set out to find a solution to this problem (probably because we were biased by what was available off-the-shelf from traditional CRM systems). Some of the interesting features suggested by investors so far include the ability to:

• Centrally store deal sourcing goals and compare them to KPI reports based on actual deal sourcing data

• Organize workflows into ‘agile sprints’ to help deal teams focus on a particular industry segment or deal (similar to the way software developers use Trello boards for agile sprints in Kanban)

• Connect to 3rd party data sources like Pitchbook or Axial to automatically import target data into the system

• Create a Q&A template for introductory call notes where the notes can be directly entered during the call and stored for each opportunity

• Automatically prepare a summary investment opportunity report on one or more opportunities that can be shared with other stakeholders (i.e., to determine interest and next steps)

• Create links to the deal documentation for each target entity (i.e. NDAs, valuation models, etc.)

Our Target Customer

We’re often asked what type of investors we have in mind when we talk about investor relationship management systems (i.e., can we be more specific?). 

Our own experience is primarily as software investors, where we have done outright acquisitions as well as minority investments. We’ve invested as part of the corporate development function in large enterprises as well as independently, in a much smaller and more entrepreneurial setting. We also have experience working on deals with family offices, private equity and venture capital. 

Most of the deal teams we’ve worked on have been in the 1 to 5 person size range. The deal teams were comfortable with technology but didn’t necessarily have access to their own IT people, nor did they want to spend a lot of time customizing their software tools. They were willing to spend money on a good relationship management system but didn’t want to be gouged. 

The teams we’ve worked on were very focused on their primary objective: to get great deals done quickly. This is the type of investor we had in mind when we started this initiative.

Get Better Deals Done, Faster

We envision a product that solves the relationship management problem (at a fair price) for small investment teams, search funds, family offices, venture investors and even some private equity and investment banking teams. 

While our background is in technology investing, our product will enhance many different types of deal sourcing –  from technology, media and entertainment to real-estate, consumer goods and services. We anticipate that our customers will however have one thing in common – they all want to find more, great investment opportunities. 

The Galaxy relationship management system is designed by investors, for investors and so it will work for most investors right ‘out of the box’, with no need for customization. Galaxy will help small investment teams achieve their goals by helping them stay organized, follow a systematic origination process and more easily track their deal activity against their goals.

Join Our Early Adopter Program

If you’re interested in a relationship management app built by investors, for investors, or if you just want to know when we add new content, click on the ‘Get Notified’ button below and we’ll keep you posted.