When structuring a fund or SPV at Vauban, I regularly have conversations with VCs based around the world. I enquire about their background, experiences in the industry, investment strategies and the steps that have led them to run a VC fund and structure their own private deals.
From these discussions, I have found that one recurring subject of conversation concerns the tools that they use to help them operate effectively – this can include anything to do with how they identify deals; gain market colour and identify trends; manage pipelines and connect with their network. Some of their responses surprised me, so I wanted to amalgamate the more popular ideas (plus with a little bit of research and experience from myself) and create a list of 5 essential tools for VCs.
This is clearly a very subjective and non-exhaustive list, and one that is undoubtedly different to other similar articles that you will read, so I would welcome comments and suggestions for anything you think should be included.
First of all, there are hundreds of different tools in the market. Some good, some not so good. Some very original, and some that we have seen time and time again.
As this is the case, when researching this article, I made a note to account for a specific stage of VC fund/fund manager – our clients have experience in the industry, however, are generally setting up their first or second fund. This is an important distinction to make, as these emerging fund managers will have different fundamental needs to their larger, more established competitors.
This list also aims to cover tools that offer benefits to VC fund managers, specifically. I haven’t included some of the more obvious tools, such as Notion and Slack (have you heard of LinkedIn?) as they are very general and used across several industries. Additionally, I have omitted some of the super well-known tools, such as Product Hunt and Crunchbase, as everyone already knows their uses.
The Tool Belt
In no particular order:
1. Sensor Tower – a great tool to help VCs understand what drives the growth of potential investments.
You can monitor trends in user retention rates, active users, demographics of users, session data and time spent on the app per user – all of which can offer huge benefits for your investment strategy.
2. Affinity – Affinity is a simple but intuitive way to track deal flow and manage your pipeline.
Their platform is very clear and offers a great, visual alternative to what may have traditionally been done on Excel! They automatically alert you in real time if anyone in your team has previously contacted the person you are emailing, which can be hugely beneficial when reaching out to potential investors or startups.
3. App Annie – App Annie’s mobile market data platform is a very interesting tool to help VC’s identify trends in markets.
From the conversations I have had, it's definitely one of the leaders in identifying growth opportunities across countries and markets, and its ability to identify emerging players or potential competitors in a specific industry can be a deciding factor for any investment.
4. Preqin – I’ve added another research tool in the list as I think its use is complementary to any VC’s tool belt. Preqin’s insight into the alternatives industry is seriously impressive, not least because their insights come from discussions they have with their network directly, but also because they offer access to investment decision-makers (and include their preferred method of contact), which can be important when fundraising.
5. Floww – Floww effectively offers a deal flow management tool, however it is their data ingest feature that I think is really cool – you can simply drag and drop a file with data from a potential investment’s deck and their AI engine and data cleansing team will identify if there are any errors or inconsistencies.
As the way we work moves more online, it may be a good time for you to look at the tools you have traditionally used and assess if there is anything out there that can help you work more efficiently. This is by no means an easy decision and there is not going to be a single solution that will fulfil everything that you need.
When adding any additional tools to your arsenal, there are a number of things that need to be carefully considered – are you comfortable with the cost, what is the initial holding period, is there a trial period, how does it fit in with your overall tech stack?
So, whilst not a decision to take lightly, it is more important not to get bogged down in over-analysis (which is easier said than done) when selecting these tools, but instead, make a decision so you can concentrate on finding that next $1bn company.