Why Private Equity Investors Need to Consider the Digital Side of the Business
Private equity investors, whether venture, growth, or buyout, are known for rigorous due diligence processes that involve analyzing financial statements, conducting market research, and assessing management teams. However, in today’s digital age, it’s essential for investors to also consider the digital side of the business when conducting due diligence. This includes paid advertising funnels, social media presence, SEM funnels, email marketing funnels, business intelligence stack, data hygiene, and data strategy.
The problem is that most private equity professionals come from traditional backgrounds such as MBAs, investment bankers, and consultants. While they may have strong financial and operational acumen, they often lack hands-on experience building and managing the digital side of a business. This can lead to blind spots and missed opportunities when it comes to assessing a company’s digital potential and risk.
This is where firms like oakpool come in. As an outsourced digital due diligence provider, oakpool can help private equity investors assess the digital side of a business and identify areas for improvement. Here are some key areas that private equity investors should consider when conducting digital due diligence:
1. Paid Advertising Funnels:
Private equity investors need to assess a company’s paid advertising funnels to understand how effective they are at driving conversions and revenue. This includes analyzing metrics such as cost per click, cost per acquisition, and return on ad spend.
2. Social Media Presence:
A company’s social media presence can be a powerful tool for driving engagement, brand awareness, and customer loyalty. Private equity investors need to assess a company’s social media strategy and presence to determine if it’s effective and aligned with the overall business strategy.
3. SEM Funnels:
Search engine marketing (SEM) is a critical component of a company’s digital marketing strategy. Private equity investors need to assess a company’s SEM funnels to understand how effective they are at driving traffic and conversions from search engines.
4. Email Marketing Funnels:
Email marketing can be a highly effective way to drive customer engagement and revenue. Private equity investors need to assess a company’s email marketing funnels to understand how effective they are at driving open rates, click-through rates, and conversions.
5. Business Intelligence Stack:
A company’s business intelligence stack is critical for capturing and analyzing data to drive business decisions. Private equity investors need to assess a company’s business intelligence stack to determine if it’s effective and aligned with the overall business strategy.
6. Data Hygiene:
Data hygiene is critical for ensuring that a company’s data is accurate, complete, and up-to-date. Private equity investors need to assess a company’s data hygiene practices to ensure that they’re effective and compliant with regulations.
7. Data Strategy:
A company’s data strategy is critical for leveraging data to drive business decisions and outcomes. Private equity investors need to assess a company’s data strategy to determine if it’s effective and aligned with the overall business strategy.
Private equity investors need to consider the digital side of the business when conducting due diligence. This includes assessing paid advertising funnels, social media presence, SEM funnels, email marketing funnels, business intelligence stack, data hygiene, and data strategy. While many private equity professionals may lack hands-on experience in these areas, firms like Oakpool can help bridge the gap and provide outsourced digital due diligence services. By doing so, private equity investors can make more informed decisions and unlock the full potential of their portfolio companies’ or potential portfolio companies’ digital capabilities.
