How to Source Deal Flow as a New Venture Capitalist
November 24th, 2021
One of the core job responsibilities of a venture capitalist is sourcing deal flow. As somebody new joining the industry, figuring out how to find new deals can be a difficult task, but if done correctly, can help you stand out among your colleagues. In this blog, we’ll take a look at five ways to source deal flow as a new venture capitalist.
Sourcing deal flow can be solely driven by personal connections. In fact, over the last few years, there has been an increased dialogue about the issues with the VC community’s closed network. With that, though, the reality is that knowing and meeting people can make you great at finding access to new deals. Other investors and founders likely have access to people and knowledge that you don’t, so your network can be your greatest ally for deal flow.
So… get out there and start meeting new people! If you are in a major or growing hub, there are always opportunities to attend networking events, like accelerator demo days, dinners, talking events, and even online communities to meet new people remotely. Pro tip: when you meet someone new outside of a work setting, schedule a call to get to know them better!
There are a few ways to leverage social media to get access to high quality deal flow as a new venture capital investor. The first is to be a part of the community and bring your opinions online. Follow people and topics you find interesting, interact with people and companies, and try to be as helpful as possible. These relationships will start online, but can lead to great friendships IRL.
Another way to leverage social media is to create your own content that brings value to your followers. Whether it’s breaking down existing products or just sharing your own opinions, this is an opportunity for you to share your own unique perspective! Founders want to work with investors they like and can trust - creating a track record of being yourself and sharing your opinions can be a way to differentiate yourself from your competitors.
Create an Inbound Tool, Service, or Community
Without excess capital (a la Tiger Global), investors need to differentiate themselves by being excessively helpful. The standard process is for investors to tell founders, “after we invest, we’ll help you with X, Y, & Z,” but a great way to stand out is to create value for founders before investing. Creation of value is only one side of the coin, though, because on a deeper level, you’re also showing empathy for pain points that founders run into. Traditionally, these pain points tend to fall within building their product, fundraising, and recruiting, but find out what founders within your investment focus are struggling with and help solve it!
While this is a major reason that you would follow the aforementioned advice of attending networking events and joining social media communities, it is worth focusing on how essential it is to have a network of co-investors. Knowing and having strong relationships with a tighter group of co-investors understandably leads directly to deal flow: if you have a track record of participating with them, they’ll share deals for you to participate in.
There are two kinds of relationships between co-investors. If you are primarily a lead investor, you will look to have a network of smaller co-investors that will help you close out the round that you lead. If you are not a lead investor, you’ll have a network of co-investors that are lead investors that will bring you onto deals that seem like a good fit for you. As a lead investor, you will likely have deals flow upstream as well, as your smaller co-investors will share deals that seem applicable to your investment thesis.
OnePager Investor Day
One of the best ways to get access to high quality deal flow, is to subscribe to the OnePager Investor Day newsletter. Every other week, the team at OnePager reviews hundreds of companies that upload their deck, team bios, metrics, and fundraising information, and shares the top 20-30 OnePagers. This is an excellent way to see new deals on a consistent basis whether you are a new VC or already have a strong track record. OnePagers are also very consumable and shareable, so you can review more information and act faster on the startups that you find interesting or fit your thesis.
Join investors from Greylock, Bessemer, Bain Capital, Banana Cap, Rosecliff, General Catalyst, M13, and more, by subscribing now.