What is VC Deal Sourcing And How Do VCs Source Deals?

If you’re in the startup world, you’ve probably wondered how do VCs source deals? After all, it seems like they always have their finger on the pulse of what’s hot and happening. Surely, they must have some sort of inside track that allows them to get access to the best startups before anyone else does, right?

Wrong. In reality, many times it’s not about who you know but what you know. That’s because of a lot of VC deal sourcing. How do VCs source deals?

The best way to find investment opportunities is to network with people who are already in the industry. This will give you access to the best deals and help you make better decisions when it comes to investing.

In order to be successful, it is important to have an effective strategy for sourcing venture capital deals. Sourcing deals is an art form, and the most successful venture capitalists use a combination of different methods to find them. By using a variety of sourcing methods, you can increase your chances of finding the best possible deals.

VCs often rely on their existing networks when conducting due diligence, rather than seeking out the best possible options. This can limit their ability to find the most promising deals. If you’re a VC interested in deal sourcing, it’s important to keep this in mind and make an effort to connect with new people who could help you expand your horizons.

What is VC deal sourcing?

VC firms rely on deal sourcing to identify potential investment opportunities. scaling and maintaining high-quality deal flow begins with sourcing high-quality deals.

Once a deal has been sourced, it is processed through the company’s internal assessments and due diligence processes. From there, they can be referred to as potential investors. investors, managing partners, and LPs have the opportunity to review deal flow and establish valuable relationships at various stages in the deal pipeline.

How do VCs source deals?

To source quality deals, it is essential to build and nurture relationships within your professional network. to optimize your VC sourcing processes, identify the key contributors to your deal flow and do your diligence.

Harvard Business Review conducted a survey of 900 VCs and found that almost 70% of deals are sourced from connections in their network. This will allow you to monitor your connections and make a plan for keeping in touch. You can also maintain the potential for a partnership or investment in the future.

This post will discuss how the best VC firms source deals. Specifically, we’ll outline the five primary ways in which many of our venture capital customers think about organizing their sourcing efforts and how relationship intelligence–insights into your network, business relationships, and customer interactions that help your team track, manage, and close deals–supports that organization.

1. Keep in touch with the top connections

There are already people in your network who regularly send you deals. These include other investors, startup founders, and investment bankers.

Who are the people who refer the most to your firm?? These people have the greatest impact on the effectiveness and efficiency of deal sourcing. You can identify them with an intelligent CRM platform that allows your team to keep track of all these contacts and set reminders for important follow-ups.

To maintain strong relationships with quality contacts, you can stay in touch via phone, email, Skype, or virtual meetings. If they see a great opportunity to invest, they will remember you better if they have deeper connections.

2. Establish relationships with co-investors

Building strong relationships with your co-investors and investors in companies you’re interested in can help increase the effectiveness of your deal sourcing efforts. To start building these relationships, reach out to your existing portfolio investors or potential investees and introduce yourself. Then, keep the lines of communication open by staying in touch and sharing updates on both sides. By nurturing these relationships, you’ll create a valuable network that can support your future deal sourcing activities.

Working with other investors, from angel investors to late-stage investors, can help expand your network into new areas. Even if you don’t decide to invest in a new sector, you can still make connections that could be beneficial later on. Every deal you close in your network is another data point that can be used when making potential investments.

You can track deals using a relationship intelligence platform, which enriches your internal data with information from external vendors. You can combine information on co-investors with these industry data sets to get a better picture of each deal in your network. Your team can identify key leadership changes that could indicate investment opportunities and the timing of certain deals, so you are better informed about potential investments.

3. Make watchlists of startups in your network

The most successful VCs understand the importance of being ahead of the competition. Deal sourcers who reach out early are the best. Many potential investments will be turned down simply because the timing isn’t right.

timing is everything when it comes to making a valuable investment. Click To Tweet

You may find a valuable investment opportunity in a company that you keep in touch with and pass on to your children.

It is important to identify and label companies according to the investment criteria that you and your team are passionate about. This will allow your team to quickly create a watchlist based on your investment thesis and exclude companies you don’t intend to revisit.

This watchlist should be reviewed every Monday during your team’s weekly meeting. By regularly reviewing this list, you can use your CRM’s analytics to create custom dashboards that are easily reviewable and visually present changes that are important to you. These include new valuations, recent leadership changes, and new funding rounds. keeping in touch with these teams will allow you to speed up deal origination and prevent you from missing an important investment opportunity.

4. Keep track of strategic advisers

Have you ever found yourself interested in an opportunity, but unsure of who to reference check it against? Is there anyone out there who can help you assess this situation?

Your colleagues can help you create tagging systems for your CRM that allow you to quickly categorize and search for the contacts you need. These systems can be used to streamline your due diligence process. With these systems, any member of your team can quickly search for a specific type or person, even if they don’t have a direct connection.

A new member of the team may be looking for someone in healthcare who has been on an advisory board that helped vet a potential new opportunity. Although They have never met this person before, the advisor is familiar with your firm. A quick search in your CRM will reveal the contact and allow the new team member to continue the conversation.


So how do VCs source deals? Sourcing deals is one of the most important and time-consuming activities performed by venture capital firms. But, as mentioned in the article, VCs approach this problem quite tactfully and smartly.