Bite Investments Report Reveals Key Drivers of Digitization Among Investment Firms

Biting investments published a report in collaboration with Merger market concluding that improving access to data and operational efficiency are key drivers for the digitalization of investment firms. The report, titled “The Tech’s Factor: The digitalization of private markets in 2022 and beyond” reveals how digitalization is shaping the private equity industry and how fund managers are adopting technology, for what purposes and how the size of a business can be a determining factor in speed, success and satisfaction.

The report interviewed senior US middle market executives, specialty funds and asset managers on the topic of digitalizing private markets. Research has found that being ahead of the game when it comes to digital adoption is crucial. 90% of companies with more than $1 billion in assets under management agree that staying ahead of their organization’s technology capabilities is a top priority.

“Investors are arguably the most important part of the private capital ecosystem. Responding to their desires and demands is therefore a top priority for alternative asset managers. Digital adoption is needed to help improve this customer onboarding,” said William RüdebeckCEO Bite Investments.

“There are high expectations for digital growth. We found that large enterprises are much further ahead in terms of digital adoption and how this will be applied to their value chains. This means small businesses can still capitalize on a first-mover advantage among their peers,” said John WestEMEA editor at Mergermarket.

“The pandemic has been a catalyst for digital adoption in the private equity industry. But no matter what happens with covid-19, the benefits realized from this change are here to stay. We are not going back to the old ways of doing business,” Rudebeck added.

The report shows what a digital future would look like for the private markets industry. Key findings include:

  • External digital investments are expected to increase. More than three-quarters (80%) of large enterprises expect to make external digital investments (e.g., to advisors and service providers) in excess of $1 million, with 33% expecting investments between 5 and $10 million. Small businesses with less than $1 billion in assets under management expect to make proportionally smaller investments in external digital investments.
  • Portfolio/fund management and analysis and investor profiles are at the top of the top digital priorities for businesses. Larger companies also identified that investments in digitization will improve investor onboarding, relationship management and communication, while smaller companies identified due diligence as one of the key business functions to digitize.
  • Cloud/Software-as-a-Service (SaaS) will have the biggest impact on how private equity firms operate over the next ten years. For this reason, increased investments in cloud/SaaS solutions are deemed necessary to improve operations. A majority of companies expect to invest more in areas where they have already made progress and investments. These include cloud/SaaS solutions (78% to 80%) and social media, mobile and collaborative digital technologies (75% to 83%). The main benefit of using cloud/SaaS platforms is to streamline operations.
  • Third-party service providers are used for a wide variety of services. The size of the business often dictates the services needed and prioritized. For example, 81% of large enterprises use a specialized third-party software service provider for their due diligence. However, small companies are more likely than large companies to say they currently use third parties for their portfolio/fund management, analytics and investor profiles.
  • Operational efficiency will be the most important long-term effect of digitization. Operational efficiency at the portfolio company level is critical to a private equity firm’s value creation playbook. Other long-term benefits respondents most often expect from their digital investments include access to improved data quality and quantity (78% of all respondents). Digitization projects will not succeed without good, clean data.

“This information reaffirms that as digitalization accelerates, fund managers will need to adapt to the continued technological evolution. Our mission at Bite Investments opens up possibilities in alternative investment markets with digitalization and a forward-thinking new approach, allowing companies to configure their own digital platform to enhance the experience of existing and potential investors and sponsors,” concluded Rudebeck.

  • Francis Bignel

    Francis is a junior journalist with a BA in Classical Civilization, he has a specialized interest in North and South America.