Shakespeare said, “If you can look into the seeds of time, and say which grain will grow and which will not, speak then unto me”. In this quote, replace grain with startups and you get the basic thought that envelops the mind of VCs. In this post, I am going to talk about the importance of monitoring portfolio value as well as how to do it effectively.
After VCs make the first investment in a company, they are thinking about the additional capital requirement for future rounds and ultimately a successful exit. Therefore, having a dynamic portfolio monitoring system can enhance the decision-making power of VCs.
1. Keeping track of valuation of your investments
Valuation of an investment is one of the significant indicators of how the company is performing. Subsequent changes in valuation signal where the company is heading. VCs continually ask portfolio companies to update their metrics. Using excel in such cases requires a lot of manual work (data entry and modelling) where VCs lose their valuable time. And this time can definitely be better spent on sourcing deals or managing the portfolio companies.
The Kushim suite provides a platform where VCs can send an email to the representatives of the portfolio company (through the platform) to come to the platform and update the metrics. VCs can then monitor portfolio value of their investments in the portfolio value section, which gets updated with new information.
2. Forecasting the effect of future financing or exit
When you have all historical information in one place, easily accessible in a user-friendly way, the analysis becomes much easier. In order to make the right decisions, It is important to continually speculate future performance of portfolio company. This allows the VC to effectively plan for either additional capital in next rounds of financing to keep fueling the growth or not participate in the next round. In order to do speculation easily, it is essential to again have all information in one place and an option to quickly execute speculative scenarios.
One way to speculate in the Kushim suite is to add data for probable future funding/exit directly from the Portfolio Value section. Then you can see how it changes the metrics (such as realized and unrealized IRR, proceeds) of the portfolio company. In fact, you can see the change in metrics for the entire portfolio. You can always delete such speculative funding decisions by clicking on the cross against the funding record from the funding table.
3. Performance comparison of portfolio companies
It is essential to compare the valuation of portfolio companies to see how different companies are evolving. Different portfolio companies operating in the same industry can show different valuations. For example, one is declining or stagnant while the other is growing. Such comparisons can assist the VCs in better allocating their time to manage the portfolio companies. Furthermore, it also empowers them to dig deeper and uncover new information about how successful/unsuccessful companies perform. As a result, they can use that knowledge to better manage new portfolio companies in the future.
The Portfolio Value section of Kushim suite provide an easy to compare tool. Here with one click you can select the portfolio companies and compare their valuation over time. You can either compare companies separately or make groups of companies and compare them. You can always export all portfolio value data to Excel.
We are continually adding new features to our Kushim suite to empower investors to better manage their investments. If you want to know more about measuring the performance of your VC fund click here.