May 20, 2024

Build vs Buy: The Debt Deal Dilemma for Modern Investors

Mark Bruny
Build vs Buy: The Debt Deal Dilemma for Modern Investors

It’s 2024 so at the very least you should be looking to retire any remaining practices of sharing variably formatted excels and documents via email. Your investors need something better.  

So let's talk about a classic dilemma: building your own deal monitoring and management system from scratch or buying a pre-built solution. Both options have their merits, and the "right" choice depends on your specific needs and resources. 

Building Your Own System

There's a certain allure to crafting your own system, especially if you have an internal tech team who can. You get complete control; you can tailor features to your exact workflow.

Here are some potential benefits of building your own system:

  • Hyper-Customization: Need a specific data field for that unique asset class you invest in? No problem! Build it in.
  • Workflow: Automate repetitive tasks like generating reports or sending reminders.
  • Integration Independence: Connect your system to any tool you like, as long as you have the technical know-how.

But hold on a sec, there's a flip side to the DIY coin. Building a system from scratch requires some serious resources:

  • Time Investment: Developing a robust system takes time – time you could be spending on building other systems which your customers touch, therefore increasing your customer experience, sales, and overall business valuation.
  • Technical Expertise: Are you a domain expert who can accurately describe exactly what you want to a tech team who may not have any knowledge of private debt? 
  • Ongoing Maintenance: Security updates, bug fixes, and new feature development are all on you. Will you be committed to constantly improving your platform overtime or will it stagnate and you will be left behind again in 5-10 years’? 

So what about buying one off the shelf? 

Let's face it, building a car from scratch takes a lot of effort. Sometimes, you just want to hop in a pre-tuned machine and hit the road. That's where pre-built deal management systems come in. These solutions offer a streamlined approach, allowing you to focus on what you do best – finding and closing deals.

Here are some reasons why buying a pre-built system might be a good call:

  • Speed: Get up and running quickly with minimal setup. No need to wait months for development.
  • Cost-Effectiveness: Subscription fees are often more predictable than the potentially ballooning costs of custom development. Often subscription fees are less than the salaries of the people whom the system replaces.
  • Ongoing Support: The vendor handles updates, security, and new features, freeing you to focus on your core business.
  • Industry best practice learnings: A specialized developer in their industry will be constantly learning and adapting their system from the experiences of the whole industry, not just the experience within your company. Especially important when thinking about risk mitigation. 

However, pre-built solutions come with some limitations:

  • Customization Constraints: You might not be able to tweak the system to your exact preferences. (However note, alot of systems DO allow a large amount of customisation like Cascade… just saying)
  • Integration Hurdles: Connecting the system to your favorite tools might require additional effort or workarounds, although good providers will work around this issue.

In Summary

So in short, build when: 

  • You are a domain expert so know exactly what you are building. 
  • You have a very niche problem which cannot be solved by using something off the shelf.
  • It will put zeros on the valuation of your business by having your own system. 

Otherwise, it’s probably better to just buy off the shelf. 

Ultimately, the best choice depends on your unique circumstances, but beware of the “just because” trap.  Just because you can build something doesn’t necessarily mean you should. 

Want to learn more about Cascade's turnkey operating system for private credit? Book a strategy call with our team.