Why KPIs alone aren’t enough: 5 workflows that rely on integrated data

Private fund finance teams have historically collected portco KPIs – often referred to as portfolio monitoring - in tools that no one uses. Other than sending and responding to KPI templates, no one uses these KPI collection tools because they lack context. KPIs in a vacuum, disconnected from investment data and board context, aren’t particularly useful.

Finance teams end up doing the rigorous work of portfolio management in Excel spreadsheets that include investment data, and the result is of this is two siloed work streams: backwards-looking portfolio monitoring in a KPI collection point tool, and strategic, forwards-looking portfolio management in many different spreadsheets.

Foresight solves this problem by directly integrating with fund accounting systems, cap table providers (and Excel), CRMs (eg Affinity, Attio),third-party data feeds (eg Pitchbook, Harmonic), enterprise productivity apps like Slack which contain all kinds of portco context, board decks, and of course KPI data collected from our native KPI collection capability. All this data is unified with AI and built into the dashboards, workflows and process automation that fund finance teams use every day to truly manage a portfolio, not just monitor it.

To bring this point to life, here are five critical portfolio management processes that require the combination of multiple streams of data:

‍Valuations

 Valuations are tricky for a lot of reasons, not in the least because if there are five different investors in a private company there will be five different marks. They’re also tricky because the investment team has one point of view, and the finance team has another, but the soundest valuations integrate multiple data points.

Sure, you need company revenue, but you also need performance commentary from the board deck and deal team notes, comp revenue multiples, holdings from the general ledger, and cap table data (usually from Carta).

Co-investor performance

 Private market investing is often a collaborative effort, but not all collaborations perform equally. Knowing the performance of companies by co-investor can help determine which relationships you double down on. To do this analysis, you of course need to be able to slice your IRR orMOIC by co-investors and by companies, which means you need KPIs, cap tables, and IRR or MOIC.

Critical cash runway vs investment priority

 Knowing which companies are running out of cash isn’t complete data. What matters is knowing which companies are running out of cash that matter.This requires knowing which companies you have a board seat through the CRM, ownership percentage from the cap table, and seeing cash runway from KPIs. For example, you may decide to allocate reserves only to companies where you have a board seat and own 10% or more, or for other reasons indicated in a spreadsheet, if the company is a top priority. By combining fund accounting data and reserves modeling, you can project the cadence and pace of calling and deploying capital against needs and priorities.

Revenue multiple expansion or compression over time

 Multiples expand or compress depending on market cycles, sector growth expectations, and risk appetite. Investors often use forward revenue multiples based on projected revenue, rewarding future growth. The performance equation ends up being:

Investment return = revenue growth x change in revenue multiple

Being able to do this calc means having company KPIs as well as the investment performance.

Prioritizing platform support

 “Adding value” means allocating the very valuable time of smart people who have experience solving the many problems that private companies encounter on their journey to an exit. The squeaky wheel analogy falls apart here, because just because a wheel is squeaking doesn’t mean it deserves attention. Identifying companies worthy of platform attention requires knowing revenue, investment cost, investment performance, board presence, ownership, and ideally a scenario model (eg project DPI and TVPI) that could indicate whether the company could “return the fund.”

All of this is to say that, sure, it’s important to collect KPIs. But once you have them, what do you do with them? How do you analyze them? What do you pair them with to make the big decisions that drive performance?

Choosing a software platform that integrates every single one of your data feeds into the dashboards, process automation, and modeling tools will help you not just monitor your portfolio but strategically manage it. Foresight is the only platform on the market that delivers this caliber of data integration and native analytics. Click the purple "get a demo" button on the upper right of this page if you’d like to see these workflows brought to life in a live demo.

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