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We can all agree that operators and CEO’s need to understand their critical customer and operational data to operate successfully. That requires structured data management, analytics and visualization of key metrics. Business partners, investors and board members should have real time access to that data to help make timely decisions with the operating executives. Often, by the time investors get a handle on what is happening at a portfolio company, it is too late to properly help them succeed.

As both an investment professional and tech CEO, I know the drawbacks of the board reporting process. The traditional feedback loop between investors and management is from monthly and quarterly board reports, which are critically flawed. Board reports typically include financial data, performance ratios and some context to justify or explain that data. That tells only part of the story and often masks major business issues.

Like most entrepreneurs, as a tech CEO I dreaded the monthly board report. It was not that I did not want to share data with my investors and board, it was the numerous hours of preparation that could be better focused on operating the company. It also provides a skewed view of reality as the data is not real time and the context is from the point of view of management, who may paint a rosy picture of their vision. I was guilty of that same process.

Solution

VCs and Private equity firms should leverage a portfolio data dashboard to manage and monitor their investment.

The dashboard should include financial data pulled from accounting software and payment systems and also needs to include a host of operational metrics that companies need to successfully manage a company. This can include, web traffic data, customer profile or prospect data and campaign performance data for marketing spend so investors know where their money is going. 

All investors have relevant metrics for their industries, as well as customer data that can determine the life cycle of a company and their ability to scale. By customizing the portfolio dashboard for a particular fund, the investment professional can view real-time KPIs to support their portfolio companies. 

A data dashboard also has the following benefits:

  • All investment professionals within the fund operate on the same metrics and insights. The firm can build known benchmarks with consistent information across all properties. Associates and partners analyze the identical data when arriving at a conclusion.
  • Companies within a portfolio should be encouraged – or even mandated – to implement a common system that gives the gift of data insights to the operators as well as the investors. That way, all players see the same data and speak the same language.
  • Management saves valuable hours from preparing for traditional board reporting.
  • Investment decisions become simpler for follow-on funds or cap structure changes based on real time performance. 
  • Investors can have summary dashboards with logins for analyst, associates and partners based on what they want to see. 
  • Funds can better report on performance to their institutional investors by aggregating portfolio company data into an overall fund metric.

Transparency in customer data reporting is essential to allow investors and companies share as partners in growing a company. We are at a point in the evolution of data management and data visualization that is cost effective to implement a solution. If you are VC or Private Equity firm and want to give the gift of success to your portfolio companies, require such a data dashboard before investing. Your portfolio companies will thank you and your investors will thank you when you realize a valuation amplifier for your fund portfolio.

-by Ed Vincent-

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