What are the best practices for prioritizing VC deal pipelines?

2 Use a scoring system

The next step to prioritize your deal pipeline is to use a scoring system to rank and compare the deals that match your investment thesis. A scoring system is a set of criteria and weights that you assign to each deal, based on your own judgment and experience. For example, you might score each deal on a scale of 1 to 10, based on factors such as: market size and growth, product-market fit, traction and revenue, competitive advantage, team and founder fit, valuation and terms, and exit potential. You can use a spreadsheet, a CRM tool, or a dedicated software to track and update your scores. A scoring system will help you quantify and standardize your evaluation process, and identify the most attractive and urgent deals to pursue.

3 Apply the Pareto principle

The third step to prioritize your deal pipeline is to apply the Pareto principle, also known as the 80/20 rule. This principle states that 80% of the results come from 20% of the causes. In the context of VC deal sourcing and screening, this means that 80% of the returns come from 20% of the deals. Therefore, you should focus your time and attention on the top 20% of your scored deals, and discard or delegate the rest. This will help you avoid wasting time on low-quality or low-potential deals, and concentrate on the ones that have the highest chance of generating value for your fund and your portfolio.

4 Follow a consistent workflow

The fourth step to prioritize your deal pipeline is to follow a consistent workflow for each deal stage. A workflow is a sequence of actions and tasks that you perform to move a deal from one stage to another, such as: initial screening, first meeting, due diligence, term sheet, closing, and post-investment. You should have a clear and documented workflow for each stage, with defined roles, responsibilities, deadlines, and outcomes. You should also use a tool or a system to monitor and manage your workflow, such as a kanban board, a project management software, or a CRM platform. A consistent workflow will help you streamline and optimize your deal execution, and ensure that you don't miss any important steps or details.

5 Seek feedback and validation

The fifth step to prioritize your deal pipeline is to seek feedback and validation from various sources and perspectives. Feedback and validation are essential to challenge your assumptions, test your hypotheses, and confirm your decisions. You can seek feedback and validation from different sources, such as: your co-investors, your mentors, your advisors, your peers, your existing portfolio companies, your potential customers, and your industry experts. You should seek feedback and validation at different stages of your deal pipeline, such as: before you score a deal, after you score a deal, before you make an offer, and after you make an offer. Feedback and validation will help you improve your judgment, reduce your bias, and increase your confidence.

6 Review and refine your process

The sixth and final step to prioritize your deal pipeline is to review and refine your process on a regular basis. Reviewing and refining your process means analyzing your performance, measuring your results, and identifying your strengths and weaknesses. You should review and refine your process at different levels, such as: your individual level, your team level, and your fund level. You should review and refine your process at different intervals, such as: monthly, quarterly, annually, and after each deal. Reviewing and refining your process will help you learn from your successes and failures, and adapt to the changing market conditions and opportunities.