Dealflow series #1
Optimize your Deal Flow Process
Deal flow is the lifeline of every investor. Having great deal flow (meaning: high quality and, ideally, in high quantities) determines the success of a venture capitalist (VC) to a large extent. However, investment professionals experience that generating and managing deal flow can be a time consuming and intensive process that demands efficiency. The way many teams currently organize their deal flow process, however, lacks the structure and effectiveness needed to thrive in an increasingly crowded industry.
Simply put, deal flow refers to the rate at which your company receives new investment opportunities. According to research by Teten Advisors, the average investor in private companies evaluates over 80 opportunities to make a single investment. The same study also found that closing a single deal requires an average of 3.1 full-time investment team members - and 20 meetings with management.
Needless to say, it's virtually impossible for you and your colleagues to manage all these potential deals from memory. Consequently, this means dealflow needs to be documented. That documentation is often stored across different tools and members of your team. This is largely due to the fact that many investors have not moved beyond generalist tools like Microsoft Excel and Outlook to keep track of their deal opportunities.
Do More in Less Time in Growing Investment Teams
Multiple individuals and teams throughout your organization likely play a role in securing an investment. When holding team meetings to evaluate potential investments you want to have a fruitful discussion, point each other at important deal elements and provide suggestions for next steps. All in a time-efficient manner. To achieve this, you need your whole team to be on the same page, meaning that everyone should be up to speed on who did what and when, where the deal is headed and what the next steps are.
This becomes a real challenge when critical information is scattered across emails, spreadsheets, and numerous file storage apps. With only so many hours in a day, it can be a tedious task to find and bundle relevant information when needed. On top of that, these methods make it all too easy for details to get lost or forgotten, or for a meeting or phone conversation not to be followed up on as promised.
The lack of a system for recording and managing interactions with a vast pool of potential target companies puts an additional administrative burden on the team who spend too much time and effort on gathering latest updates and information, more often than not resulting in unnecessary delays in a deal process. The lack of one source of truth in the dealflow phase often slowly decreases the quality of the decision making process, without the team noticing.
Most of you will probably recognize these challenges. Download our whitepaper below to learn about the four tips we've bundled to optimize your deal flow processes.
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