How Data And Analytics Are Changing The Model For Investing
In May I had the privilege of speaking to a collection of GPs and LPs about what the future might hold as it relates to the impact of data and analytics in PE. Markets Group asked me to speak at their Tenth Annual PE Forum in NYC. I enjoyed the two-day event as the roster of sessions was broad yet detailed. Moreover, it was great to be live and in person once again.
I was lucky to enroll the help of my client and friend, Dave Averett for this talk. Dave runs the Peak Performance Group at Summit Partners. He started and has built up that capability for Summit over the course of the last 10 years. I’ve watched as Dave and Summit have taken incremental but bold steps to leverage data and analytics as a core differentiator for their investing efforts. He was an ideal subject matter expert for me for the Markets Group conversation.
We talked about Summit’s historical use of analytics as they review the trappings of their successful deals. What were some commonalities? What data points proved to be derailing signs? Because Summit has been around for many years, and because they’d been focused on capturing and recording as much as they could, the firm had a built in head start.
Dave walked us through how they’ve operationalized their data and analytics strategy under the framework of “sourcing, systems and data analysis”. He broke down his team construction philosophy for us as well… his thoughts on this were state of the art and I’ve seen a few other firms follow along as they hire into their own teams. A person with an analytics spike paired up with a deeper IT systems expert is a powerful combination.
My own personal opinion is that real differentiation for PE firms in this context revolves around the sources of information that they can access: some proprietary, some not. But this is clearly an area where real innovation can occur. Taking cues from hedge funds or other sophisticated investors, PE can mimic their “sources of information” approach and even take steps via A.I. or Machine Learning to mechanize the timely sourcing of deals which have a higher likelihood of success. One can only imagine what it would be like to have an internal system serving up multiple targets per week that are inside the strike zone of deals that could and should get done. Maybe deal origination will no longer be a constraint to success. The future is promising if a firm has the conviction to invest in these cutting edge strategies.
Click here to access the slides from the event: https://lnkd.in/gJDfrpgY
