The world seen through ten thousand lenses
Taking inspiration from nature, WovenLight has built unique technology, DragonFly, to underpin a ‘PE 2.0’ approach throughout the investment life-cycle.
Authors: Angus Taylor, Principal Product Manager, Thomas French
Head of Product Engineering, Pamela Brent, Senior Associate at WovenLight.
A dragonfly has five eyes: two large multifaceted ones, plus three simpler versions. Its large eyes are made up of tens of thousands of lenses, while nearly 80 percent of its brain is dedicated to the processing of vision — the dragonfly is thought to perceive the world as if in slow motion, despite flying at up to 35 miles per hour.
It sounds poetic, but the dragonfly sees many times faster than a human and can put thousands of lenses on the world. At WovenLight, we named our technology Dragonfly in tribute to this remarkable insect.
But what does it mean to put ‘thousands of lenses’ on the type of business
and technology problems we encounter when analysing investment opportunities? This article takes a look at the unique set of technology and tools that powers our investment strategy at WovenLight, from sourcing and diligence through to value creation under our ownership.
Sourcing and selection
With a more traditional approach, private equity funds often gather data over time on a company, accelerating only in the later stages of a deal process. This leads to funds entering into expensive processes, which are abandoned as new data surfaces. Deals also stay in the pipeline for longer, slowing deal velocity and taking up valuable team resource. Moreover, during traditional sourcing, the lack of initial data can lead to bias in the selection process, where deals can be unduly influenced by relationships, specific people’s biased opinions, and confirmation bias. This leads to suboptimal outcomes.
At WovenLight we look to accelerate the speed at which we can gather data and gain insights on companies, moving our diligence upstream. Dragonfly facilitates the acquisition and consolidation of data, from research data to proprietary diagnostics to APIs linking to third party data sets.
We centralise this in our intelligence gathering database, which enables a unified view of a company that evolves during the investment life-cycle. Dragonfly provides a series of tools and applications to enable the investment team to interact with our database, speeding up the efficiency of the investment process and using technology to scale collaboration and transparency.
Accelerating the speed at which we gather data, and increasing the amount of data captured in our intelligence database, leads to two advantages for our selection process. Firstly, the process becomes quicker, accelerating our understanding of companies and enabling a higher velocity of our deal pipeline. Secondly, by capturing live data which is updated in real time, our selection process becomes more dynamic, increasing the accountability of our investment team and thus reducing bias in the selection process. Additionally, the capture of this data enables feedback loops which drive improvement in our process over time in a ‘fly-wheel’ motion.
Traditional diligence can often be slow and expensive, and presents challenges in gaining differentiated insights compared to other buyers.
At WovenLight, we accelerate our understanding of the business through rapid data and analytics diagnostics for management teams, and which provide a two-way source of value. We look to assess and validate the value creation opportunity from applied data science and the technical feasibility of implementing business changes, generating genuinely differentiated business insights. This benefits the companies themselves, as we share these insights with management teams and support them in understanding the potential impact of data analytics on their business and the ‘art of the possible’.
At the same time, Dragonfly’s calculation engine leverages the intelligence database to score various aspects of potential portfolio companies. This gives the investment team an additional tool for assessment of any company which is probabilistic and evolves as new evidence emerges. This helps us to structure and focus our diligence process more efficiently, and continues to increase the accountability of the investment team. As companies become part of the WovenLight portfolio, these metrics will continue to be tracked, creating more feedback loops and improving the calculation engine over time.
Traditional private equity focuses primarily on deploying traditional levers to create value, some of which may have been previously deployed at the company with limited further benefit. The specific levers to use, and their impact, often cannot be precisely quantified prior to acquisition.
At WovenLight we use a more structured approach. Embedded within Dragonfly is our tried and tested playbook of value creation methods (‘value plays’), which accelerate our path to capturing value through data and analytics.
Building repeatable analytics is challenging given the changing context of problems and the data which varies across companies and use cases. Dragonfly contains a series of value play templates which are both guides and a collation of data repositories, features, and hypotheses with analytics libraries. Dragonfly therefore helps us to accelerate the deployment of tried and tested value plays at companies at scale, rather than redesigning each value play from scratch. We have written more about some of the challenges of building repeatable analytics here.
These value plays are underpinned by Dragonfly’s infrastructure, which rapidly provisions and configures secure cloud and analytics infrastructure. On top of this, it acts as a platform enabling the orchestration and integration of deployment tooling into a single coherent delivery plan. Together with the value play templates, this enables faster deployment and value capture for companies using data and analytics.
We have an ‘open source’ mindset which means making Dragonfly’s tools available to portfolio companies and embedding our IP during ownership. This is supported by rollout of relevant recruitment, onboarding and talent development in portfolio companies, and is accelerated with shared best practices and technology choices. Transfer creates a sustained performance gain as we transfer our knowledge and tools as a capability. It’s a partnership with management that leaves a company with new and sustainable capabilities upon exit.
During ownership, significant time and effort is spent by private equity funds in monitoring portfolio companies on a live basis, and reporting the status of investments to LPs. This often involves manual gathering of data and preparing long reports in an ad-hoc manner which requires input from,
and creates distraction for, both the portfolio company and the private
Using Dragonfly, we plan to replace the often analogue approaches for monitoring and reporting with our ‘real-time’ tracking tools, which will automate a significant portion of the manual effort. These help in reducing time spent on monitoring, increase transparency, and crucially — using both internal and external data — will help find ‘red flags’ or potential issues earlier, allowing earlier intervention and protection of value.
Each point of data we capture — whether in the sourcing, diligence, or value creation phase — represents another “lens” through which WovenLight can perceive and assess a business. Like the dragonfly itself, our Dragonfly technology allows us to capture and process this data more quickly and efficiently than humans alone. In sourcing, this leads to quicker processes and reduced bias; in diligence, this generates genuinely differentiated insights and focuses our rigour; under our ownership, it leads to sustainable data-driven value creation and increased transparency for our portfolio companies.
These tools, when combined, allow our portfolio companies to adapt
and thrive in a world of increasing technological change.