There has been limited investment and adoption in InvestTech – At this point, Microsoft is the market leader in InvestTech, with Excel, Word, Outlook and Sharepoint used almost universally. Ashby Monk’s recent article in Institutional Investor articulated this exact point: 1996 Called, It Wants Its Tech Back. It is an interesting state of affairs that the industry is still dependent on quarter-century old general application technology for word processing, quantitative analysis, emails and file sharing. Ripe for disruption!
The irony, of course, is that the community who would be the users of new tech solutions is actually also the LP investor base in the venture capital firms which fund innovation and make bets on the next big thing. Why have they not invested in a tech solution to ease their own pain points?!
Fragmented B2B: InvestTech is B2B, in an industry that is quite fragmented with a lot of players competing vigorously for share
Difference in Scale: Traditional VC metrics around scale have a very different meaning in the investment landscape. You could have scale at working with aggregate AUM of $100bn for just a few investors, but most VCs require a larger base. Another metric being $100mm revenue potential, which while being a real possibility, is not evident immediately.
Resources, resources: Most investment offices are not a profit center with unlimited resources, some even have significantly diminished decision authority. These limiting factors extend the time to drive behavioral change, which in itself is a slow process. Patience is a true virtue!
Leadership demands: Culture and leadership around risk taking is not always rewarded. I am sharing a delightful quote from my recent LinkedIn feed:
The number one prerequisite for high performance is courageous, relentless leadership. High performance is primarily a function of people and culture – not data and technology. ~ Mario Morino (Morino Institute)
The courageous are going to be the leaders in adoption of data and technology!
In spite of the above, let’s examine the state of the tech used by investors: current offerings give investors automation, market/regulatory data, and decision analytics for multiple stages of allocation, manager selection, execution, ongoing monitoring, transparency and fiduciary reporting. The map that we generated with help and input from industry friends is definitely not empty, with some pockets getting more attention than the others. The issue is that there’s limited innovation. Limited adoption. And limited integration. Up until now! 😊
Credit:@Surya Viswanathan & Industry Friends. Did we miss your name? Pls email email@example.com
1/3rd of the products on this map didn’t exist half a decade ago. Today, more and more ideas are being executed, getting funded, and getting adopted. Still, there are areas which remain un- or under-addressed: investor and fiduciary education, and collaboration amongst investors, just to name two.
For investors, access to data has become easier and cheaper. Applications of general purpose AI have also benefited in driving up productivity. However, for most investment offices to function smoothly, multiple tech solutions need to be integrated. The InvestTech firms themselves are recognizing this challenge, and future winners will present open architecture and partnerships, almost creating an empowered and irresistible ecosystem solution. Will the venture capital firms managing the investor money provide the catalyst of capital enabling industry wide adoption? Or will it be a collaboration amongst the investor users themselves? Only time will tell.
Disclosure: We are at the center of the universe here simply as authors of the industry map, and make no claim to having the solved the issue, not just yet! 😊