Deal flow management is the cornerstone of creating, growing, and managing venture capital funds. However, deal flow management can also represent one of a venture capital firm’s most persistent frustrations, especially when a firm does not have the right technological resources.
Fortunately, you can streamline critical processes by familiarizing yourself with some common issues with deal flow. Once you understand the sources of common problems, you can overcome them by adopting dedicated software for venture capital firms.
Deal Flow Management Issues that Undermine VC Firm Growth
As your firm grows, you’ll undoubtedly encounter deal flow management challenges — if you aren’t already experiencing them. Some of the most common stumbling blocks include the following items.
Losing Sight of the Partner
Venture capital management is often viewed as a pure numbers game. This viewpoint is understandable, as your firm deals with substantial capital and various investment opportunities.
You must also perform countless daily calculations to assess risk, align this potential risk with your fund’s tolerance, and capitalize on emerging opportunities to grow your fund.
While staying focused on the data and how that information impacts your fund is essential, you can’t get lost in the numbers. If this happens, you’ll have forgotten about the most vital component of your business: your partner.
Providing an outstanding partner experience is and should always be priority number one for your firm. When partners are pleased with the process and the result, they’ll develop a sense of loyalty toward your company. This loyalty provides the foundation for a strong reputation within your industry and the potential for future growth.
There are many ways you can enhance the partner experience. First and foremost, you must always keep the partner in the loop. You can do this by providing a real-time view of the state of investments and maintaining clear lines of communication.
Rushing Through Due Diligence
When deal flow management processes are inefficient, it’s tempting to cut corners to make up for lost time. Taking shortcuts is a common mistake in the venture capital management space.
One way some firms cut corners is by rushing through due diligence. VC managers who have notched a few wins on their belt may feel as though they can “trust their gut” at the expense of due diligence. Far from being a boon, this overreliance on intuition is a recipe for mistakes.
You have a fiduciary responsibility to your investors. As such, you must thoroughly research every investment opportunity before you commit a single dollar to it. Otherwise, you may let your partners down and gamble with your firm’s reputation.
Effective deal flow management technologies will help you maximize overall firm efficiency. Implementing the right technology will give you the extra time you need to perform thorough due diligence without running the risk of missing out on fleeting investment opportunities.
Failing to Use a Single Source of Truth
Does your firm use separate monitoring tools and deal management software? If so, you’re creating undue friction in deal flow management. Using different software solutions for various tasks and processes is inefficient and can create problematic data silos.
Data silos form when information is stored, or “siloed,” on one platform but not shared with other software. Silos prevent your software and, more importantly, your team from accessing the information they need to fulfill their responsibilities effectively.
You can eliminate data silos and promote organizational efficiency by establishing a single source of truth on a unified platform that allows you to store deal-related data in a centralized software solution.
Oracle NetSuite ERP is a prime example of a single, unified solution. While it has multiple modules and tools, the entire solution is managed through a centralized interface.
NetSuite seamlessly shares information between various platforms, ensuring everyone can access the information they need to optimize deal management.
Neglecting to Establish a Clearly Defined Process
Every deal is unique. However, all agreements have predictable milestones and steps that must be completed to see them through to completion.
In light of this information, you must institute a clearly defined, repeatable procedure that your team can use to guide them through deal flow management processes. You should also implement a standardized method for due diligence.
A standardized process guarantees you never overlook key deal flow management steps.
In time, your team will become incredibly efficient at progressing through the repeatable steps outlined in your standardized procedure. Ultimately, this step will reduce the frequency of errors during deal flow management while enabling your staff to be more productive.
Leveraging the Wrong Software
Implementing any software is a time-intensive and costly endeavor. If you deploy the right software, your investment will pay dividends for years to come. However, if you invest in the wrong software, you’ll end up throwing money at your deal flow management problem without seeing any meaningful return.
What exactly does the wrong software look like? Here are a few signs that a particular solution is not the right fit for your venture capital firm:
- It wasn’t purpose-built for deal flow management.
- It has a narrow set of tools that only address a single issue.
- It isn’t scalable, meaning it can’t grow with you.
The right deal flow management software is the opposite of the technologies mentioned above.
Premier deal flow management technology is cloud-based and scalable, meaning it can evolve with your venture capital firm. Additionally, it will include a diverse array of dynamic tools, which you can use to tackle a broad range of organizational challenges.
Perhaps most importantly, the right deal flow management solution will be purpose-built for your industry. NetSuite fits the bill.
NetSuite was built with a purpose. It includes everything your organization needs to streamline deal flow management. Since it was designed to address issues in your industry, your staff will immediately realize the value of adopting such a tool.
Why NetSuite Is the Ideal Software for Venture Capital Firms
NetSuite checks all the boxes of the “right” software for deal flow management. NetSuite is a robust, cloud-based solution that includes multiple modules, each of which features a specific set of tools and capabilities.
When implementing NetSuite, you can deploy as many or as few modules as needed, allowing you to tailor the deployment process based on your company’s unique needs and circumstances.
As a cloud-based solution, NetSuite can scale with your firm. Whether you need additional computing resources or want to add more modules to your solution, NetSuite’s infrastructure gives you the freedom to do so.
Additionally, NetSuite provides you with advanced reporting tools to gain timely, actionable insights into your fund and emerging investment opportunities. You can use these reports to keep your partners in the loop, guide investment decisions, perform due diligence, and more.
Investing in NetSuite will boost employee buy-in and help you decrease the time to value on your new investment. Partnering with Finlyte will create an even greater ROI on your investment.
Get the Most Out of NetSuite with ION From Finlyte
NetSuite is the premier ERP and business management solution on the market. It includes a flexible suite of tools designed to meet the needs of investment firms. What we did was take the capabilities of NetSuite and introduce our solution specifically for investment firms. We call it ION (Investment Management for NetSuite).
By adopting NetSuite and utilizing our ION solution, your firm can achieve these objectives:
- Optimize every aspect of deal flow management.
- Maximize visibility for executives and stakeholders.
- Streamline deals.
- Perform extensive due diligence.
- Grow your firm.
To learn more about this exciting opportunity to capitalize on the leading software for venture capital firms, contact Finlyte today. Let’s discuss implementing NetSuite and tapping into the capabilities of ION.