Hello. I'm Alice Murray editor of the
drawdown and I'm delighted to be joined by an expert panel today
to discuss Tech transformation within private Capital funds
joining the discussion. Today, we have Mike Brogan who
is part of hgs Finance team Mike has overall responsibility for
deal execution, fund management and portfolio.
In evaluations, as well as undertaking many strategic and
operational projects across the business.
Next, we have chased Paxton, who serves as Director of Finance
and valuations at ngpa energy Capital Management.
Within that role, he prepares analysis evaluation, deliveries
overseas, Financial investor reporting fund and management,
company, forecasting and planning, as well as technology
implementation. Also joining us is Stephen Lyle
managing partner at Oxbridge Capital Partners who oversees
all operations at the firm. We also have petrol sfera of
Icarus Venture Partners whose technical expertise is in Ai.
And then o technology, he oversees implementation of data
initiatives and portfolio monitoring at Vickers.
And last but not least, we have Hugh Stacy, executive director,
investor Solutions at IQ EQ. Of which part of his role is
portfolio monitoring and ESG reporting offerings that he had
these huge. Welcome to you.
Thanks very much for joining me today.
Okay. So the past 18 months have a
undoubtedly been a major Catalyst for all sorts of change
and for private Equity, the pace of technological transformation.
Has ramped up dramatically the tech transformation survey,
which we carried out in partnership with IQ EQ, was to
diet designed to check the pulse of the industry's transition at
this. Pivotal and fascinating point in
time, we wanted to know if managers are really moving away
from Excel and manual processes towards more sophisticated.
An automatic systems. But the report made strikingly
clear is that the role of technology in private Equity is
a vital one. Today's Roundtable discussion
will review key findings from the survey and provide detailed
to the data. So on to our first question and
our survey found that a large proportion of the respondents
are currently looking for new software solutions for callback
and middle of his functions for fund Administration.
That was 34% for compliance and Reporting 33% of waterboarding
waterfall, distribution, that was 33.
So here I'll come to you. What does this tell us about?
Private equities willingness to use, software Solutions, what's
behind this? This finding I think you've got
to sort of manage your organization to what works best
for you. So a lot of product if I manage
is a fairly lean or they have been fairly lean teams and
therefore, you know, the availability to Outsource
something is perhaps a little bit easier for smaller teams.
Whereas larger organizations may want to go down the route of The
getting a software themselves and they have the scale to do
that and all these things, always take longer to implement
them first, then, first envisage.
So, I think the other way for managers are looking, you know,
if you're a fairly sizable manager, organization that that
back Office Accounting piece should already probably be in
place, to be honest. So there now Looking at other
software's, whether it's portfolio monitoring, whether
its waffled calculations and there is a whole plethora of
different vendors out there when the last little three, four,
five years. And I think covid has been
Catalyst to this in some respects because people want
more transparency, investors are asking more questions.
So I think people are have been concerned in the pandemic, know
how is the pandemic influence their portfolios and therefore
there are asking For managers more questions around sort of
tracking those portfolios. So I think I think there's been
a bit of a concentration or Focus but again I'd like to hear
what the actual practitioners are on the panel, what they're
saying. Yeah.
You know, I re with you in a lot of ways especially over kind of
the change that's happened in the market and availability of
software over the last three or four years I've been with in GP
for a little over eight years. And What's on the market now is
so much better than what was available eight years ago, you
know, it felt like there were a lot of products that were being
built and there was some sort of wrapper or something.
On top of it, trying to serve PE versus being functionally built
up for private Equity or Venture.
And I think, you know, a lot of our earlier technological
implementations. I left the really bad taste in
our mouths and it kind of took us two or three years to kind of
reset and kind of work with what we have.
But a lot of the products that were Oriented kind of see are so
tailored built and I think that just goes hand-in-hand with
totally um growth and the space and people can make money just
in PE now making PE Solutions and that's really changed kind
of fundamentally the quality of the products.
And you know that makes me really excited that you know, as
we move from maybe some Legacy systems to more custom built
systems, where we don't have to have an implementation partner
that we can manage yourself. That understands the space that
you guys probably also driving the bottom and with other
managers just booked the qualities.
Is significantly improved particularly with just normal
status products for running crms or monitoring portfolio,
companies and things like that. And that's pretty exciting for
the space in terms of Automation and efficiency, My coming to and
thinking about this, this kind of theme coming through about
it, being able to buy in software and simply plug it in
is, is that generally possible today?
I mean, we, you know, totally agree that software has improved
but everyone has different needs and any system needs to be
tailored. To your specific demands and
what you want to do with it, implementations did a bit of a
headache. Yeah, absolutely.
Now very much agree. What what choice was saying
actually, in terms of the evolution of the of the private
Equity space and therefore, that sort of software that that's
produced and required to keep up with that sort of
sophistication, implementations of software products and never
straightforward. As you say, every single firm.
And sometimes different funds within that firm have their own
nuances, their own sort of specific.
Needs and it's never a quite a plug-and-play solution that you
get. That said you know I've been in
HD for 10 years and I've seen how that how that industry is
involved, you know, materially and how the the as I suppose I
was more money flows into that industry.
It drives that sort of development and suddenly the
space and the market is of a scale where software providers
build specific solutions for that market.
And that's certainly making our life easier.
And it's Exciting time to be able to see these new products
and how that can help us and make us more efficient as a
firm. But, no, in terms of, in terms
of your question is, never straight forward.
It needs to be resource properly.
It needs to be diligent to properly beforehand and make
sure that it does actually solve the problem that you're solving
for. And that's always the challenge.
I think with these with these products, Sad and pets.
First coming to you. If you were, you know, if there
is a decision around Just simply buying software in or engaging
with a third-party outsourced provider, what would be the kind
of main considerations around that that kind of decision.
And I think specifically on kind of what it means for your
internal resources because often I talk to managers and whichever
decision they take. It can often mean having to have
another person in place to deal with one of those options.
Yeah, yeah. I mean, that's true.
I think that's the big consideration and taking off the
shelf, things and versus custom things is that you, you have to
spend less resources. But the one thing to say is that
they both of those options have required.
Lots of resources if they're not sort of very standardized or if
it's not sort of out of the box. If you have to design something
off of from scratch, it's always going to take a lot of time for
the team. And I think what I'm I'm I'm,
I'm not as I haven't been in looking at this space, as far as
long as Chase has, but what I'm seeing are sort of couple of
years when we've been looking at.
This is that does seem to be a lot more tailored solutions for
the, for the space, which seems to still be in a transition
where there doesn't seem to be a lot of standardization both from
the software side, but also from the needs of the industry.
But I think as this matures there's going Be more
standardization both from the needs of the industry but also
from the software Solutions and then and then it becomes very
easy. The barrier still to implement
new things is still fairly High because there is that commitment
of time. You need to figure out how
you're going to translate these Legacy systems into a more in
you way and sort of changed ways of working.
But I think that this is an evolution and we're and we're
sort of on the transition of of something of things becoming
law. Lower barrier to sort of move to
two more sort of standardized Solutions on these things.
Yeah, and okay, Steven, I want to come to you in this because
giving your strategy and give them what you do, you know,
large amount of the investment. But you know, companies in
earlier stages that might not be as you know what you're helping
them. Do is to become sophisticated
and develop teams. So reporting, I think he's
specifically around put reporting and portfolio
management. I imagine everyone speaking very
different languages or you know, some only just starting to learn
kind of financial lingo. How can you use tear core
supporting Partners to kind of overcome?
What must be quite a big Challenge and a big lot of work
for you? Oh, you settle out there.
Well, first of all, you know, because we cover the entire
Venture, Continuum, you know, we have Oxbridge Angels, which is
co Brent co-branded. It's a very early early stage
and that's people that runs pretty autonomous.
Even though my co-founder of rashid's Newberry and myself,
are directors of that it basically runs itself in your
eye, it's a global, you know, even though we are focusing on,
you know, Startups that come out of the Oxford and Cambridge
University ecosystems include a college and the entire London,
golden Golden Triangle. That's a lot of bodies, a lot of
moving Parts. Lots of issues you have to deal
with compliance and so the angels have their own set of
compliance issues and then the VC course operates on another
plane and we scale up those startups but I think it's
important if you're operating a space is a Solutions provider
just to realize you know what is the?
What is the what? You knows the biggest pains a
private equity and I did, I can tell you from, you know,
spending a half a million dollars out of my own pocket,
just don't legal fees and, and other startup costs.
You know, it's it's it's really really painful.
It's I call it death by 1000 and Enterprise Solutions, you know.
So you can go. Wow.
And do you can you can service all of this by buying software
packages? And but then, like I said, it's,
it's extremely painful. And we're really, we really what
I liked about IQ EQ is that you know, whether they, whether they
are creating native Solutions, and, you know, their own native
apis, you know, or they're stitching together, OEM deals,
it doesn't matter to us, you know what we're looking for.
Is somebody who has The best-in-class solution stack
that solves all these problems for us.
I'd rather write one check a month and no the people like an
extension extended part of our team versus a bunch of outside
solution providers. That that's, that's the
ultimate, it's about the solution stack.
And I think of the solution stack is like it's like it's
like you're it's your offering to the marketplace.
It's your 8 layered cake. Okay.
It solves, all these pain problems.
And for us, our primary concern is to create a safe place if our
LPS very important. It's a very simple thing to stay
to say, is this a safe place and so when they access, you know, a
platform. And I do believe in the platform
platform ization or the enterprising of everything, you
know, the kyc, the AML the reporting to the LPS, it's
customized and then we want to create an elegant place.
So if if I give a link to an outside LP did they accept And
it's very clunky looks very Soviet or is it is, you know, is
it elegant? And by Elegance is a beautiful.
Is it state-of-the-art as we like to say in Hollywood?
Is it sexy? Is it cool?
Like wow is the first time I've ever had Vision to my private
Equity Investments. This is really, really cool.
I feel safe and also this is really cool.
Those are the takeaways. That's what I like to hear from
from These were the user for IQ EQ, but our users are LPS and
they need to enjoy this journey. And we want to make that Journey
as comfortable and safe and as fun as possible.
As I'm happy to sort of continue on that, because there is so
many software available that for a fund manager, they could buy
another 20 different software for the different requirements
and I think that there's no one software that can basically meet
all their technology requirements.
So, you know, as Steve was saying, you know, there are
other options available to people rather than Spy software
will build software themselves. But again, it just depends on
the size of the organization. And because obviously the bigger
the organization, the more resource they had for that.
But not all pee from oranges are, you know, tens of billions
a. Um, I think it has to be horses
for courses in terms of what people requiring.
So often the outsourced provider group can be a viable option and
a quick in cost-effective option, as well as delivering
its even saying a service which is which they, you know, need to
get to get, you know, get online and And allow their investors.
That's the security and comfort that have got this covered,
okay, we've been dancing around it a bit but there's no
conversation today about private Capital markets Tech without
talking about data. So Petrus, giving this is
banging your sweet spot. I'll kick off with you first to
my mind, a surprising amount of our survey respondents 82
percent said that they don't currently have a data lake and a
handful of respondents 13 percent rated their data
practices as being highly effective.
Most people said they were average.
So what's going on when it comes to data, everyone knows they
need to have it. But seems to be a bit of a
Italian, actually making it sing.
Yeah, sure. So it's yeah, it's an
interesting observation. I think two things to say here
for us, in terms of upgrading our, my are sort of accounting,
self software, Etc, a big motivation when we were trying
to do. This is, is is thinking about
data, quality and and sort of it.
When you work in Excel, when you used to reuse working in Excel,
you used to having lots of lots of data across the The space.
And also if you were to sort of try and some of these sort of
smaller Solutions, you end up with siloed data all over the
place where as we were quite Keen to just have our data in
one place. So have our accounting system,
talk to our reporting system and have instead of remove that
friction between them. This tumor, this, to
motivations, for that. First of all, as the other
saluted as well. The, the Asians from LPS and our
investors. Are you, they want more of these
data, sort of a tad. They're not just happy to just
see their drawdown. Not says, they want to
understand what the where the movements were have.
It came to it, what the valuation, what, what's
underlying, the valuation that people are becoming more data
hungry, they used to more data but also as Venture investors,
we tend to have much smaller teams and so removing those
frictions in how do we get that data to our LPS in the easiest
way was, it's quite important for.
It was quite important for us in terms of data Lakes as well.
I think maybe I'm not the right person to comment on this
because when it comes to venture are our data is small and
sparse. So so when so you don't need
sort of huge databases that you like, a sort of simple database
is more than enough where we could use more data leaks and
where I see, Where that it's going, is when we talking about
data, I think in this context we must be thinking about financial
data but as a lot of other data there's contracts, there's this
kind of things. So yes I can see this bit place
where bring it all together would be a powerful place to be
but I think there's there's there's we there we earlier in
the journey then sort of building this this
all-encompassing databases and with Petros it's our deals.
We if Looking at a late stage, a round or be round.
You looking, at a say, you're looking at a pre-revenue
momentum type of a play. Sure.
Your maybe we pay for some data over pitch pitch deck, which is
kind of the gold standard, you know, in terms of, you know,
looking at deals like how did you if I'm an LP out the maybe I
would ask us, how did you how did you come up with that that
pre-money. Valuation.
What was the driver of that and because it's so Dynamic, right?
I see a, you know, you know, I said across to deal fronts, I
said across the deal, last I miss at across said across, many
deal funds, but there are two deal fronts that give you.
An example. There are Silicon Valley were
saw a 13 year old girl had a Pikachu app that took digital
poo-poos. She got five hundred thousand
dollars on a 10 million pre-money.
Okay, and then I see a Founder a postdoc at Cambridge who has a
solution to treat a certain form of cancer and they've already
have a proof of concept and they're selling, you know,
they're looking for 100,000 pounds on a 200,000 free money.
You see what? I'm dealing with here.
I don't know how much that date is going to help me.
All right. Okay, so, because it's so
tactical, it's so micro tactical, all right?
And yeah, I can reference this data and I but I don't know how
valuable it is, you know, if we're doing reporting and say,
Here's how we stack up against the indices, but they can get
that to get it to. So, you know, as I'm not
personally, I'm not, I'm not surprised about that.
Statistic at all that 60% don't have a current, have a data.
Lake in private Equity. Because, you know, I think data
Lakes are really, you know, it's a significant cost it
significant or project to implement and actually do
successfully. So you have to be of a very
large-scale fund manager, asset management firm to want to
implement this in. It's a huge undertaking you know
someone like ourselves like a service provider clearly.
It is a requirement because we're dealing with so much data
on behalf of Clients with its portfolio monitoring, whether
it's ESG reporting or it's the accounting.
So you know where we're getting lots of different data sources
coming in to us, it makes it makes sense.
But for a fund manager who's got two or three funds, you know it
wouldn't necessarily be a cost effective measure to in terms of
the value, add you going to get from it.
I think so but again happy to hear what others others think
again some like Michael You'll Chase might have a different
view on this bearing mind. They're slightly different in
terms of their their scale. But yeah, I'm not surprised at
all on that statistic. Yeah.
So in terms of data like so we are actually in the in the
sixty-two percent that don't have a data like but I guess
it's something that now comes up a lot more regularly for us and
we're reaching that scale where it becomes quite important.
So it's, yeah, it's very much on our radar.
We've looked at a few platforms already that integrate and we're
starting to use some of those platforms that integrate data
from different systems whether you classify, As a proper data
like or not. I'm not sure.
But certainly there is a, there is a movement in that direction
and I think we've also sort of touched on the, the challenges
of that. And for me, it's the quality of
that data for us, you know, we're we have a number of
different software Solutions within the business they use for
different purposes, but sometimes collect similar or the
same type of data. And so when you, when you're
sort of moving to that data like one source of Truth, Sort of you
that a lot of firms of our source Kayla getting towards,
it's all about the quality of that data, who owns it, it can
be quite a big task and I know a number of firms have specific
data managers or team of data analyst who whose pure
responsibility is to look at the quality of that data and to make
sure that it's maintained and and you have proper
responsibility for that. So I think that's that's the
challenge. As I said, I think Getting to a
scale. Well, that's that's very much on
our radar and something that might imagine we probably look
towards in the next, you know, two, three, four years but also
recognizing that there's challenges in doing that.
And, and it needs to be properly resource and thought about and
that clear ownership of whose data is this and who's
responsible for maintaining. It is, is it is a real problem
when you reach that sort of scale, say sticking on data data
like those speeds. Given that you have you know,
overseas from the investor reporting.
And other thing that are I said they threw up was that about a
third of respondents predicted, the LPS will in the future
request direct data. Feeds, what?
You know is that something that you can see happening?
And if so what would that mean for you?
We've definitely seen all piece try.
We've seen you know, initiatives that Come come together and
felt. It seems impossible to me for it
to happen. I mean we, you know, we get, I
don't know how many Help LP templates a day, they're all
different, they all want information differently.
They all Define their data fields, differently it all
requires some sort of level of customization or some unique or
some call or teams meeting with our team to say, what are they
really asking here? Even if we've been in business
with that healthy for 20 years in some cases.
So it seems Monumental it would be incredible for our team if we
could really standardize around information that's required and
Reporting, that's required and leverage that and then we could
build a system to meet those needs.
It's just we could build a system to meet, you know, direct
out if he's for a couple are big, LPS, but it would still
leave us with the one-offs that would consume a lot of time.
So, you know, there's a balance there between being as friendly
and creating the safety. Help.
He's particularly on the smaller side so that they feel like they
have that personal connection even as you grow the firm in
trying to manage their requests. And also just trying to be
efficient and automate. So it seems, you know, Herculean
in terms of that actually ever really happening just because
limited partners are so diverse and sort of what they need and
what they're asking for. But it would definitely drive a
lot of Automation and a lot of efficiency in the back office.
If it were ever to really gain significant momentum, we act
like Riku investigations, provide a fund manager.
Clients the the cosmos portfolio monitoring platform Solutions.
So that's for them to do internal analysis and slice and
dice their data for their existing portfolio and more and
more. We're starting to.
I have fun manager, say to us. Can we give access to our LPS to
the platform directly as of yet? No one's actually taking it on,
but there is the capability to do that.
And I think, Just by the very fact that people are starting to
ask us. The questions is showing that
there is that sort of thirst from LPS to have direct access,
but I don't think that will ever supersede the sort of LP days,
the quarterly. Well, I think quarterly reports,
I think in five years time, I don't think it would be unusual
set of the quarterly reports done more on a dashboard styles
of log on to it online. And we're starting to see that
for some of the lp clients when their board members are having
having Boards they're actually rather than getting a PDF
document or even a print out the going on to the dashboards and
looking at online from iPads or you know, laptops acceptor.
So I do think that is a it's going to be a fairly slow
progression but I do think that will be the trend.
So I don't know if that answers the question.
What? Yeah, I mean, yeah, I have
spoken to a couple of I think ya might went in there that you
know where firms have specific data, people that does seem to
be an area that they're increasingly looking at.
But I think you know portfolio management and did origination
is more of a priority at this point.
Okay so a final point I want to look at is the estienne and I'll
come to you all for some concluding remarks Petro sorry,
I'm going to pee Corner again, just because you sort of
mentioned it when we were talking about data.
There's a very obvious data financial data but more and
more, LPS and GPS, won't to see less structured data.
And I'm thinking specifically around ESG, so with a kind of
increased desire to be Reporting and, you know, get your kpis and
understand the Geo AES G impact of your Investments.
How is that impacting your technological needs?
Yeah, I mean that's a good question.
I think he is G is one of those topics that's causing a lot of
drive towards automation because there's there's your silently,
adding a lot more data that you need to feed and it's it's and
it becomes quite a quite a manageable if it's to
unstructured. So, you need to put some sort of
structure so for us as a venture investor and and sort of We
invest across a broad range of various technology.
So from biotech to energy to materials and finding a
framework, which we can, we can measure everyone against.
It's been the main challenge there and sort of.
So we're at the step of before sort of gathering the data is
figuring out how we even want to measure these things.
So it's it's so I think that there's there are some
initiatives out there so this is no problem.
No. It's just we having problem with
we're not.we does feel like we're Reinventing the wheel here
but it's something the industry has been talking about a lot of
times it's clearly that needs to be some sort of standardization
around this and certain structure put around this.
And there are some initiatives recently, that that try to put
that and try to implement that, it still has a lot of drawbacks
is doesn't work for everyone. But I do feel like there as we
go on, they'll will be a bit of civilization because he is G.
When you say yes, G, it's not just one thing.
It's so many things that you can measure and it's it's adding so
much data that you want to gather and want to tour.
And for us, when we're dealing with some startups that are
five, Ten to Ten people, we don't want to be asking for them
to be filling in this long forms and quarter on quarter.
So we do need systems, we do need standardization, we do need
some sort of simple ways of recording this, but then on the
other side, it's more of a basis.
You need sort of some basis to understand to have to get a
general View and I think that's what LPS are asking for as well.
It's sort of that that basis of that you can sort of get a quick
overview, but fundamentally this business is there's a lot of
nuances. And there is a lot of a lot that
can be lost if you just looking at the data.
So the voice-over is always an important part of it.
So in fact, a lot of our data is not structured is unstructured
and that's the bit that our investors finally the most I
think at this stage because that's that's where you really
understand what's going on and really understand the context
around what you're seeing in the data.
So I think I see that sort of continuing to move forward, but
More and more trying to structure the HTC one side of
things to make it manageable. And thank you so much.
Everyone for your time, for your expertise, for your insights,
sharing your knowledge, and your experiences at Super