How do you balance the quantity and quality of your deal sourcing and screening activities?

1 Define your sourcing strategy

Before you start looking for deals, you need to have a clear idea of what kind of deals you are looking for, and where you are likely to find them. This means defining your sourcing strategy, which includes your investment thesis, target sectors, geographies, stages, and sizes of companies, as well as your preferred sources and channels of deal flow. Your sourcing strategy should align with your overall investment objectives, risk appetite, and value proposition, and should be flexible enough to adapt to changing market conditions and opportunities.

2 Build your sourcing network

One of the most effective ways to source quality deals is to build and leverage your sourcing network. This includes your existing portfolio companies, co-investors, advisors, mentors, industry experts, accelerators, incubators, events, platforms, and other relevant stakeholders in your ecosystem. Your sourcing network can help you access referrals, recommendations, introductions, and insights that can enhance your deal flow and screening process. To build your sourcing network, you need to establish trust, credibility, and reputation, as well as provide value, feedback, and support to your network members.

3 Track and measure your sourcing metrics

To balance the quantity and quality of your deal sourcing, you need to track and measure your sourcing metrics. These are the key performance indicators (KPIs) that help you assess the effectiveness and efficiency of your sourcing activities, such as the number of deals sourced, the number of deals screened, the number of deals advanced, the conversion rate, the time to screen, the cost per deal, the source diversity, and the quality score. Tracking and measuring your sourcing metrics can help you identify your strengths and weaknesses, optimize your sourcing strategy, and benchmark your performance against your peers and industry standards.

4 Apply a screening framework

Once you have sourced a deal, you need to apply a screening framework to evaluate its fit and potential for your portfolio. A screening framework is a set of criteria and questions that help you filter out the deals that do not meet your minimum requirements, and prioritize the deals that do. A screening framework can cover aspects such as the problem, solution, market, traction, team, competition, business model, valuation, and exit potential of the deal. Applying a screening framework can help you save time, resources, and effort on due diligence and negotiations, and focus on the most promising opportunities.

5 Use a screening tool

To facilitate your screening process, you can use a screening tool that automates and streamlines some of the tasks and functions involved. A screening tool is a software or platform that helps you collect, organize, analyze, and manage data and information related to your deal flow. A screening tool can help you create and customize your screening framework, track and measure your screening metrics, compare and rank deals, communicate and collaborate with your team and stakeholders, and generate reports and insights. Using a screening tool can help you improve the speed, accuracy, and consistency of your screening process.

6 Review and improve your sourcing and screening activities

Finally, to balance the quantity and quality of your deal sourcing and screening activities, you need to review and improve them regularly. This means collecting feedback, learning from your successes and failures, identifying gaps and opportunities, and implementing changes and improvements to your sourcing strategy, network, metrics, framework, and tool. Reviewing and improving your sourcing and screening activities can help you adapt to the evolving needs and expectations of your market, customers, and portfolio companies, and enhance your competitive advantage and returns.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?