Before you can invest, you need to work out what to invest in – sounds simple right? However, deal origination is one of the most critical steps in the investment process, building the foundation for what could be a long-lasting relationship. It begins with scouting for companies with high-growth potential and ends with rigorously evaluating their operations via due diligence.
It’s no secret that digital transformation is overhauling many of the processes within the investment community. And deal origination is no exception. Technology can obviously mean many things, from simply emailing your coworker to adopting quantum computing for solving complicated equations.
Recently, we sent out a Canopy video questionnaire to carefully selected experts and asked them to provide their perspectives on how technology is providing more advanced and creative solutions to their processes.
Pieces of the puzzle
For one senior investment manager, the possibilities are manifold.
“I think technology can really be helpful in deal origination and streamlining processes and enhancing efficiency. For example, the data analytics tools can really quickly sift through a vast amount of data, identifying potential deals and market trends. CRM systems can facilitate better relationship management and communication with stakeholders, which will aid in deal identification and cultivation.”
Overall, he says, “technology serves as a valuable ally, expediting and optimizing the origination process in general.”
Nicholas Umar, who is a private equity VP at Affinity Equity Partners points to the possibilities of augmented and virtual reality in bridging distances.
“There are certain property development companies and some other asset heavy sectors … that we also rely on AR/VR for virtual site visits. Because sometimes you have one company with so many different assets in various different regions.”
For a principal at a venture capital company, technology comes into its own for advancing the due diligence process. “Whether it's competitive landscape, differentiation, financials, you name it. This is where technology really unlocks the potential to incredibly accelerate all of the work that one does.”
Where to start?
Just as important as the what is the how. For the senior investment manager, a three-part strategy comes to mind. “First, I think it's extremely important to just invest in comprehensive training programs to ensure the employees are sufficiently proficient in using that technology in an effective way. And secondly, you should tailor technology solutions to the specific needs and workflows of the organization, of course, and really focus on seamless integration. Thirdly, maybe regularly evaluate and update the technology stack, of course, to incorporate advancements and ER and emerging tools. They can further optimize the processes. And finally, maybe just think about fostering a culture across the entire organization of innovation and adaptability.”
Umar takes it back one step, calling on companies to look to internal expertise first. “This one I think relies on our IT team to make sure that they're actually on the forefront of changes and new themes, new patterns of changes in technologies.” Other than that, he recommends not only finding consultants, but keeping an open mind. “We engage consultants … pretty frequently, and they come to us and propose new technologies. And so, just being open to that process of proposals from various different vendors when it comes to new technologies, I think that really helped us to adopt a lot of the new technologies out there.”
It’s not all roses, however. In the next article in this mini series on deal origination, we’ll take a look at the potential pitfalls and whether people’s attitudes are keeping up within this sector.
*Canopy helps investors make investment decisions faster. Gather multiple expert insights , without scheduling or conducting a single expert call. Find out more Canopy use cases on our investors page and book a quick demo if you’d like to see it in action.
