How can you identify effective deal sourcing channels for your investment strategy?

Before evaluating your deal pipeline/channel, you should have a set of criteria in which the startup deals are measured against. Regardless whether you are a VC/CVC/PE/angel, usually the common first set of screening criteria are: 1. Stage of the startup: It relates to the investment thesis laid out by the VC funds/CVC strategy. 2. Location of the startup: many VC funds/CVCs have geography mandates. 3. Vertical/industry the startup is in: Some VC funds are vertical focused and CVCs usually are more interested in related verticals. Some CVCs have more tolerance for longer horizon synergy. 4. Business model: B2B, B2C, B2G, etc. Then, there are criteria related to the startup itself, which tend to be varied among different investors.

Top 3 ways for us would be: 1) Participating at various events across the country. 2) Effective PR strategy 3) Referrals and Channel Partners

A few things come to mind: - Stay connected with VC and PE firms that focus on your target industries - Engage with angel investors and seed funds that invest in early-stage companies, as they often have access to unique deal flow - Participate in or sponsor startup competitions and accelerators to identify promising early-stage companies - Consider the geographical focus of your investment strategy and build local connections

Here are some strategies to consider: 1. Attend relevant conferences, events, and meetups to connect with potential founders and stay informed about emerging trends. 2. Leverage online platforms like AngelList, Crunchbase, and PitchBook to discover and track startups. 3. Partnerships with reputable startup incubators and accelerators. These organizations often provide a structured environment for startups to grow. 4. Collaborate with specialized investment firms and consultants who focus on specific sectors or geographies.

My tests are simple: 1) Does it have the ability to be a multi-billion dollar deal? There's no time for bunts, homeruns only. 2) Does the proponent show honesty and integrity? 3) Is it complex and requires a team? The more complexity, the higher the execution risk. 4) Is the entry point being offered allow for maximum ROI?

It’s all about the people. For me, pursuing the deals/ ideas/ opportunities of genuine professional friends has been far more fruitful than where my capital (human or financial) has merely been a commodity to be sought by others…. …. Watch out for someone “selling” (you to them, or vice versa) - instead, how big’s the cake you’re “baking” together…. Which language are you both speaking? Genuinely.

A robust and reliable network is essential for effective deal sourcing. Your network, encompassing portfolio companies, co-investors, mentors, and industry experts, is a vital resource for referrals, insights, and exclusive deals. Cultivating this network demands time and trust-building, but its payoff is access to high-quality opportunities and crucial information. Networking strategies include attending industry events, engaging in online communities, sharing expertise, offering assistance, and maintaining consistent contact with your connections. This proactive approach in networking not only opens doors to potential deals but also fortifies your position in the investment community.

To effectively identify deal sourcing channels through networking, immerse yourself in industry events, both physical and virtual. Actively participate in seminars, conferences, and online groups tailored to your niche. Establish meaningful connections by listening attentively to the challenges and needs of professionals in your field. Additionally, leverage platforms like LinkedIn to join industry-specific groups and engage in discussions. Be proactive in reaching out to potential partners and investors. Cultivate a reputation for collaboration and reliability within your network.

Effective deal sourcing hinges on your network. This includes portfolio companies, mentors, industry experts, and alumni who can provide referrals, feedback, and exclusive deals. Building this network takes time and trust but offers high-quality opportunities and vital support. Attend events, engage online, share expertise, help others, and nurture relationships.

Be at VC and angel industry events Participate in an angel group Apply your expertise to the causes of the industry, be an active public speaker on related subjects

Generally speaking, investors and venture capitalists use websites such as Crunchbase and AngelList extensively in the deal pipelining process. These platforms might offer a virtual area where investors and startups can interact, exchange information, and look into possible funding possibilities. However, they have some limitations: a) it requires more overhead cost to filter them out, which may not always the focus of VC fund. b) From the experience, it can be seen that visible/hyped invest opportunties are not always the best to enjoy the Xs (returns), c) Moreover, in the EM, culturally speaking, founders often lack the pitching skills, confidence etc. Hence, better VCs approach them directly thru different channels for sourcing.

Try them out. Stick to what you know and industries you’re aware of. Make sure to put yourself out there and keep an open mind. Stay in touch with companies and ask for those you’re interested in to keep tabs on you. Be helpful where you can and give genuine advice.

To my understanding, cutting through the noise is very important for very early stage investors (pre-seed/ seed). In terms of networks for such investors, it could include prominent angels, angel networks, incubators/ accelerators, etc. The reliability of networks would determine the reliability of deal flow. In terms of deal discovery platforms, they could look at a platform that allows them to analyze emerging themes/ business models and helps them cut the noise.

Exploring online platforms like Crunchbase, AngelList, and others can be a useful deal sourcing channel, providing access to a wide range of startups and investment opportunities. However, it's important to keep in mind that these platforms are accessible to everyone, so the deals you find there are unlikely to be unique or exclusive. You may encounter common, widely-known opportunities rather than exclusive leads.

In my Venture Capital & Investor Relations career, I have developed a profound affinity towards companies that help the planet and all living beings.

We run our own program and have dedicated investment criteria that apply only to program applicants. Besides running your own programs, we found it beneficial to connect to the national government and their startup activities and, through them, connect with other investors in the market. They usually know who is established in the market, who has excellent deal flow, and who they have built a relationship with over many years.

Leveraging your existing programs can be a potent strategy for deal sourcing. For instance, if your VC firm runs an accelerator program, use it as a platform to scout for promising startups. These programs often attract innovative companies in their early stages, providing a unique opportunity to evaluate their potential up close. Additionally, consider partnerships with universities or industry-specific incubators, which can be a rich source of emerging talent and disruptive ideas. These collaborations allow you to tap into a pipeline of vetted, high-potential ventures aligned with your investment criteria.

Programs that support companies in building capabilities make an excellent channel for sourcing credible deals. To make this really effective make sure the programs have criteria for participation that align well with your investment startegy.

Leveraging programs like accelerators and incubators (e.g., Y Combinator, Techstars) is an effective deal sourcing channel, offering access to startups that have been vetted and supported by reputable organizations. However, this approach is labor-intensive, demanding significant time and resources. It's most suitable for well-staffed or over-staffed venture capital firms that can dedicate the necessary effort to engage with these programs effectively.

Tap into accelerator programs or run your own accelerator program (we have done it knight.ventures in Nigeria), incubators, and industry-specific initiatives. These programs often curate promising startups and present tailored investment opportunities. Also, by aligning with reputable programs, you gain access to a curated pool of potential investments.

We tried many different channels (and continue experimenting with new ones) over the years. We also started early on to share knowledge on our website, which contributes significantly to SEO traffic that is yielding applications. Underlying any strategy is a solid methodology to measure the success of each channel. We compare channels over time and “reverse engineer” from where we receive the most valuable applications.

I found that personalised approach, sharing similar values and purpose rhymes greatly with potential investors whom you’re approaching to. Building a funnel to identify targets, this is a structured approach as part of the investment strategy. Getting connected from your networks are quite effective in terms of getting to the first calls and to get the attention of potential investors.

Evaluating marketing channels is hard, not least because you are being marketed to as you explore. Asking those in and around your'e network what works and what they have uncovered can be valuable. Easy to understand the challenge much harder to enact

Experimenting with various deal sourcing methods tailored to your investment strategy is a hallmark of a good venture capitalist. Being entrepreneurial and open to trying different approaches, whether outbound, inbound, or hybrid, is essential. This experimentation can uncover unique and diverse deals that align with your criteria and also allows for the optimization of your deal sourcing process. However, it's important to be aware of potential challenges, such as low response rates, high rejection, and ethical considerations.

Be open to experimenting with various deal sourcing methods. This may involve reaching out to entrepreneurs directly, engaging with venture capital firms, or exploring emerging technologies. Experimentation allows you to discover which methods yield the most promising leads.

I like the track everything including people. Sometimes, you find a great person in a not great start-up. Keep tabs on this person, spend time with them, see what problems that they want to solve.

Track everything. Make sure your meetings and contacts are getting tracked and measured. Evaluate which channels worked the best and understand why. Double down on what worked well and figure out how to expand.

Every exercise is futile unless the results are measured. A simple hack I use when I'm at events is to use card scanning apps like Covve, which directly saves all the data in my rolodex and its easier for me to add notes from my conversation and also reference them for the future.

there's only one metric that matters: DPI. until you're able to reach a DPI, you should be evaluating your performance in the amount of intros founders bring you. if you actually have added value, you will be the first that comes to mind for them - hence creating a huge network effect that will allow you to enter the most promising deals.

Regularly assess the effectiveness of your deal sourcing channels. Analyze the quality and quantity of opportunities generated from each channel. Evaluate the success of past investments sourced through different channels to refine your strategy continuously.

There are broadly 3 types of channels: direct outbound, marketing to encourage inbound, or referral based. The 1st these days is starting to become more and more a matter of automation, since you can use data to drive your search. You can set it up to perfectly match your thesis, but the challenge is then to win allocation. The second one can become truly proprietary if you can own an active community following or have the luxury to develop a leading brand fund with a track record people want to be associated with: wining deals is the easiest part with this channel, but there is going to be a high volume of non relevant stuff and work to manage it. The last channel is purely based on the quality of the relationships you build

Identifying effective deal sourcing channels for VC involves analyzing past successful investments to understand where they originated. Networking is crucial; build relationships with entrepreneurs, other VCs, and attend industry events. Leverage online platforms and databases that track startups and industry trends. Engage in thought leadership to attract deals. Also, consider niche areas or underserved markets where competition is lower. Regularly evaluate and adjust your sourcing strategy based on results and emerging trends.

N?o é só o fundo que precisa fazer due dilligence! Ao realizar uma capta??o, fa?a uma pesquisa profunda sobre a tese do fundo, como ele gosta de trabalhar, qual será o nível de contato no dia-a-dia, em quais atividades ele pode te ajudar e, principalmente, busque referências com outros empreendedores que receberam investimentos. Você vai ter novos sócios e esta análise te ajuda a identificar se há fit entre sua empresa e o fundo.

Traditional networks are vital, but they may limit access to new opportunities in a data-driven society. Good VCs use advanced analytics, AI algorithms, and even unusual data sources to predict trends, analyze market potential, and find hidden gems before they hit the mainstream. Platforms and applications are useful, but finding and developing raw, revolutionary ideas is the real challenge and promise.Yet, as sustainability and social impact become essential to investing theses, we must shift our focus from financials to long-term, holistic value creation. While traditional deal sourcing approaches are still important, the future calls for a more nuanced, tech-savvy, and purpose-driven approach that aligns with the new investing landscape.

Key to building an effective deal sourcing strategy lies in building a strong investment thesis. Every thesis is different for a fund and each will require a separate channel which is effective for sourcing. Let's take an example, for a VC fund investing in Biotech, working closely with an incubator/accelerator will work the best since such deal require hand holding apart from capital and grant. In another example, for a SaaS deal, one may depend on directly reaching out to founders or relying on investment bankers. Different strategy works will for different fund thesis.