For venture capital funds, front-office solutions (like Zapflow!) are specifically designed to streamline and optimize the investment management process. They are powerful tools that enable your team to optimize deal flow management.
Think about the sheer amount of information your firm has to process regularly - external communication, including deal sourcing and fundraising, and internal communication. Traditional forms of data storage and tracking on Excel are not enough. You need a powerful purpose-built tool in your arsenal to give your team a competitive edge.
To put the incremental value of adding a CRM into perspective, in 2014, the return for every dollar invested in a CRM platform was approximately $8.71. According to research conducted by Dynamic Consultants, this number has since increased to a staggering return of $30.48 per dollar invested in 2021.
VC firms are particularly well suited to benefit from CRM technology. The venture capital lifecycle - starting from deal sourcing, screening deals, deploying capital, and eventually, exit opportunities can be tracked end-to-end in a purpose-built CRM solution. We can help your firm streamline its funnel by enabling more informed decision-making and allowing efficient movement from one stage of the funnel to another.
There are various channels through which a CRM tool can optimize your funnel. This article will discuss how a CRM platform can streamline your VC processes, such as deal flow processing, fundraising, maintaining a solid network, and leveraging data.
Deal Flow Processing
The deal flow process is the first stage of your funnel. Your deal sourcing will ultimately determine the startups you fund and the returns you get for your LPs. Therefore, having a strong streamlined process from deal origination to execution is perhaps the most crucial aspect of your fund’s success.
With the number of companies seeking funding rising, the conversion rate (i.e.) the number of new deals sourced that get funded, has typically been quite low. Top VC firms like Andreessen Horrowitz fund 0.7% of the total deals they source. Depending on the type of VC firm you operate, this statistic may even be lower - boutique VC firms fund even fewer startups as a proportion of the total deals they source. Hence, your firm needs to generate a high volume and velocity of deals to have a potential breakthrough.
In order to evaluate thousands of deal opportunities every year, you need a potent tool that can centralize and track all your deal-related work. Keeping track of deals from the pitch stage to deploying capital is a long and complex process due to the number of stakeholders involved. A CRM allows your firm to manage deals at a micro and macro level. You can view the details of each deal individually and monitor your deals at an aggregate level to determine how to curate your portfolio. In addition, various aspects of the deal flow process, such as keeping your stakeholders informed, note-making, spreadsheets, and diligence, can be managed from a secure investment management CRM software.
Additionally, you can also track all the potential deals you may have passed. For example, if a deal is not the right fit for your portfolio at present, you can still keep the relevant data on your CRM platform. In the future, if certain parameters change and the venture becomes a worthwhile investment, you can quickly use your CRM tool to evaluate the deal and invest.
Building Long-term Relationships
While valuations and due diligence are technical skills that your firm needs to be proficient in, a large portion of generating deals still rests on your soft skills. The deal flow process inherently depends on your network and your relationship with other stakeholders. Therefore, your ability to build and maintain your network is essential for the VC funnel. You should check every deal that closes in your network as it can be a potential investment opportunity for you in the future.
Maintaining your network includes being on good terms with your co-investors, founders, partners, and other stakeholders in the industry. An effective CRM can centrally store the thousands of names, emails, and phone numbers that connect you to the relevant people in your network to help with effective people management. Automated data entry and the ability to sync detailed data sets across various teams enable new relationships and connections.
In addition to simply storing contact data, your CRM platform can also provide contextual data that allows you to stay updated on your relationships. This data includes the date of the last contact, related companies, historical data that contacts have shared with you, and other custom notes that make your interactions more personalized.
Fundraising
In addition to sourcing deals, the power of your network can be harnessed for fundraising. A CRM can be an efficient fundraising management tool to track and manage your firm’s fundraising rounds. Additionally, you can use a CRM to differentiate between LPs depending on criteria that are crucial for you, such as their industry or previous funding amounts.
As startups turn towards VC firms that can add value beyond the funding, it is becoming challenging to stay competitive. As previously discussed, CRM that focuses on automation and intelligent relationship management streamlines your process of managing people, including LPs. It saves valuable time by automating manual and banal activities such as tracking, reporting, and cold outreach. You can save this time and instead invest it in value-adding activities like mentoring founders and helping them with crucial hiring decisions.
Collaboration
One of the many benefits of having data stored in a centralized space is that it improves collaboration across all management stages. You have to work with multiple teams and individuals across the VC funnel - investments, co-investors, consultants, legal teams, and analysts. A centralized information management tool allows all the stakeholders to stay on the same page and collaborate, thus further streamlining the funnel.
Improved communication across teams enhances time management and helps your firm stay competitive in high-stake investment decisions. Information is an asset, and ensuring an efficient flow of information across stakeholders is critical in maintaining an optimized VC funnel.
Zapflow is a platform designed for cross-functional teamwork. You can use the tool for task creation, assignment, tracking, email integration, automated data entry, and collaboration with buy and sell-side advisors and partners. When information flow is efficient, and all your stakeholders are on the same page, your VC funnel automatically becomes streamlined.
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