Advisor: Jonathan Broch
Expertise: Private equity technology
Areas of Expertise: Advises private equity firms on the selection and implementation of technology solutions in order to drive operational efficiencies and develop strategic insights across the front, middle, and back-office.
We recently had a chance to chat with private equity technology expert Jonathan Broch who is based out of Parkland, Florida. Below is a recap of our conversation, with responses edited for clarity.
InquireOf: Describe your expertise in 60 seconds or less.
Jonathan: I work with private equity firms on software vendor selection, process design, and implementation of technology solutions. Engagements include benchmarking a firm’s current state technology and operating model against their peers in the industry with the goal of enabling clients to adopt best-in-class technology solutions. The clients are General Partners, Institutional Investors, and Fund Administrators. The private equity technology industry is rapidly growing with many newer software providers entering the field.
InquireOf: What shifts have you seen over the last five years in the private equity technology industry?
Jonathan: The number of technology providers in the space has grown immensely. There used to be 5 to 10 key providers, but there are now upwards of 40 to 50, which of course results in many more options for clients. There have also been several significant transactions in the space this year. For example, a provider sold for $500M recently and there was a $1.3B transaction earlier this year.
InquireOf: What are the most interesting trends you see in private equity technology today?
Jonathan: There has been a lot of adoption of technology in the back office (e.g., fund accounting, investor reporting); however, there is still a big need in the middle and front office when it comes to monitoring companies, data analytics, and data visualization. Firms are willing to invest in these areas in order to create a competitive advantage.
Less than 10% of firms have a strong solution in place in these areas. While the nuts and bolts are solved for accounting and back office processes, the focus is now on proactively monitoring a fund’s portfolio of investments and leveraging data and analytics similar to what is happening in other industries.
InquireOf: What trends should people look to see in the next 18-24 months?
Jonathan: There will be additional transactions and M&A activity in the space. Consolidation is to be expected with the explosive growth in the number of software providers.
There are some unaddressed markets as well. Private equity technology companies are attempting to move down market. At this point, many of the larger household name PE firms have technology, but there is an underserved portion of the market when you go down market. Historically, it's been neglected as providers focused on larger opportunities.
InquireOf: How do funds find you for your expertise in this arena?
Jonathan: It’s a close-knit industry and having been in the space for many years, funds often find me through existing relationships or word of mouth referrals. These firms need guidance to understand what systems will work well together and to build out a clear roadmap and strategy. A typical engagement ranges from 12 to 18 months or longer, but the industry is still evolving and firms tend to have additional needs arise over time.
InquireOf: Do you have any advice for funds that feel a bit lost in the private equity technology space?
Jonathan: As important as it is to select the right technology provider, it's more important to develop the proper processes and procedures around how the technology is used. Implementations fail when funds don’t have the right organizational structure in place and are unable to effectively manage change.
More often than not firms struggle the most with managing change and achieving successful adoption of new technologies. My biggest piece of advice would be to not neglect the people and process side of things while tackling technology initiatives.
InquireOf: What are the opportunity costs a fund faces if they do not ensure their technology is working well for them?
Jonathan: The cost of bad technology decisions is extremely high, reflects poorly on reputations, and has an overall negative impact on the organization. Private equity firms aren’t in business because they are experts at selecting and implementing technologies. The cost of hiring an experienced advisor to guide firms through the process pays dividends rather quickly.
The other thing to consider is the impact proper technology has on fundraising. Investors do care about the systems a fund is using, their sourcing strategy, how they're acquiring deals, etc. Investors care about accounting and reporting systems. It's a bad look to be mired in spreadsheets when it comes to mission-critical functions; spreadsheets are okay, but they should be used more for modeling/reporting than as a database.
Why Connect with Jonathan?
Jonathan has decades of experience in the private equity technology space. He provides a disciplined approach to evaluating and implementing technology solutions and also has experience leading strategy and business development functions for Fortune 500 companies.
Fun fact: Outside of work Jonathan enjoys working with kids through substitute teaching and coaching girls basketball.
If you’d like to connect with Jonathan or similarly experienced industry experts, you can learn more here.
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