Hunter Walker, a partner at Homebrew Venture Capital (VC) is often quoted saying “you lose 100% of the deals you don’t see”.
As a venture capitalist, if your deal flow process is poorly managed, you’re likely missing out on a lot of suitable investment opportunities, and this statement by Walker should jolt you to improve on your VC deal flow process.
A smooth-running venture capital deal flow process will give you more exposure, which could lead to better utilization of your funds, reduced operational costs, and more profits from your investments.
But how do you make your VC deal flow management process efficient?
Read on and I’ll share with you how to improve your venture capital deal flow process. First, however, let’s define what deal flow is.
What is Deal Flow and Why is it Important?
Venture capitalists, investment bankers, and angel investors define deal flow as the rate at which they receive investment pitches and business proposals.
Proper deal flow is crucial as it makes a VC aware of all the investment opportunities that need to be on their radar. It also helps weed out the bogus investment opportunities from the many funding requests received and quickly convert the interesting opportunities before a competitor does so.
Most successful VCs are bombarded with hundreds of emails and calls from companies looking to be funded each year. These funding requests often reach them through:
- Companies or entrepreneurs the VC has funded in the past.
- Other VCs that want to syndicate a deal.
- Their network of attorneys, accountants, investment bankers, or other professionals involved in business funding.
- Finders. These are individuals who look for the best businesses to invest in and in return expect to be paid a fee.
- Some VCs may also accept investment pitches from companies whose owners are not referred to them. Unreferred pitches, however, rarely get funding.
While a VC can receive lots of requests for funding, most of the requests are ignored.
While being interviewed at Stanford Graduate Business School, Marc Andreessen, a founding partner of Venture Capital firm Andreessen Horowitz said “Each year approximately 4,000 startups are seeking to raise venture capital funding. From an aggregate perspective, the top VCs fund approximately 200 startups per year, which is about 5%”
Vetting all the business proposals and investment pitches to pick the most viable can be challenging if you don’t have the right processes in place. OpsCheck offers a deal flow management tool that allows VCs to quickly vet and narrow down to the best possible investment opportunities for them.
A VC’s deal flow is considered efficient if it creates enough revenue-generating opportunities for the firm to keep it functioning at its peak.
Understanding the VC Deal Flow Management Process
How you manage VC deal flow can determine whether you succeed or fail.
To create an efficient deal flow process that increases and maintains your overall investment opportunities, do the following.
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Network
Like any other business, VCs have to network to get a quality deal flow and learn the latest happenings in their industry.
Venture capitalist meetups, company launch parties, investor meetings, startup events, conferences, etc. are the right places to go build your network of people who can help create and maintain your deal flow.
Social media platforms like Twitter are also a good place to interact with others in the VC industry and build a network that can help you know the best places to invest.
You could also use startup aggregators such as AngelList and SeedInvest to identify companies you would like to work with, then reach out to them to network and begin working on potential deals.
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Have an Inbound Marketing Engine
This is one of the best ways to improve VC deal flow. Inbound marketing involves keeping an active profile online. You can do this by creating interesting blog and social media content.
The content you put out should easily explain and answer any question anyone looking to work with a VC would have. Over time, that content will drive visitors to your website and social platforms who you can convert to potential leads.
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Use Deal Flow Management Tools
From your networking and inbound marketing efforts, you should be able to build your VC brand. This will get you more business proposals and investment pitches, which will maintain a sufficient VC deal flow for you.
However, your exposure to increased investment opportunities could create an unexpected problem.
If you use Excel, PowerPoint, or other old ways to manage your deal flow, getting the data you need to make the best investment decisions could be extremely complex.
The difficulty in getting the right information will slow your decision process, something that can give other VCs a chance to make a deal with a company before you do.
That’s why you should use a VC deal management tool like OpsCheck to efficiently manage your deal flow.
With OpsCheck, you can organize the investment pitches you get according to industry, compile valuable data on a company, track all operations and maintain oversight across your VC fund, effectively communicate with your VC team and partners, and create powerful visual reports that will move deals forward.
These and other things that OpsCheck lets you do will ensure you have more concise deal flow information that will make it easier for you to make better-informed decisions about the investment pitches you receive.
To learn more about how OpsCheck can help improve your VC deal flow process, get in touch with us today at 732-221-9625 or email contact@opscheck.com.