Having worked in a Corporate VC fund, I have been exposed to the merry go round that is a ‘deal flow’. As the corporate I worked for didn’t have a well-known brand in the UK, despite having significant subsidiary companies based here, it was imperative that in my role as Portfolio Manager to raise awareness of our activities, but also to straddle across helping build our portfolio companies in any way I could (predominantly liaising with the core business to unlock value for the startup) as well as helping to build a half decent deal flow of investment opportunities.
So how did we go about building this deal flow? Interestingly, this is a question I am regularly asked in interviews — clearly the million dollar question!
- We set about building a global network
As a fairly large corporate, we were fortunate to have business activity across the majority of Europe as well as a growing electric vehicle charging infrastructure/ consulting business in the US, therefore we had good coverage. However, as an innovation arm of the company, we also had ‘outposts’ in all the biggest start-up hotspots, including Silicon Valley, Tel Aviv, Berlin and of course London.
This really enabled us to begin to build a global brand, meeting with all sorts of people from different parts of the early stage start-up/ investment ecosystem, partly due to an effective marketing strategy! This meant that any deal that was sourced globally could be passed to another outpost that was most suited to help.
2. Forged relationships within the ecosystem
My focus was within the UK ecosystem and I worked hard to create both informal relationships and formal partnerships with Angels, independent VC funds, accelerator/ incubator programmes, universities and industry associations. This was either through ‘cold calling’ type activities, or through warm introductions from our collective networks.
It turns out the VC world is fairly small, particularly within early stage investors, however sharing of deal flows is something that can be quite common (probably more so than I initially thought), as it tends to be mutually beneficial for both parties. However, we were also recommended potential deals/ companies, for example if another VC felt they were too early stage for themselves.
3. Active presence conference/ startup scene
A big component of my role was to attend ecosystem events on behalf of the company. This was an opportunity to mingle with prospective copmpanies, although we took a targeted approach, only attending selective events so as to maximise our time.
This was also a great tool to scope out potential competition for existing investments, but also to meet budding entrepreneurs and build my own personal network of really interesting individuals with varying different talents!
In terms of finding potential investments, I feel this was the least effective method as often companies were either already committed to financing or they were too late stage for our scope. However, it did give us an opportunity to get our name/ brand out into the ecosystem.
4. Creating content — thought leadership
I have mixed opinions on this approach, as our data showed that viewing statistics were somewhat erratic. But we created a series of written posts and podcasts explaining our current thoughts and investment approaches, mainly distributed through our official communication channels and our own personal social media accounts (mainly LinkedIn).
This proved to be more effective in our German market, however this could be due in part to higher brand recognition in Germany.
5. Desktop research
Aside from meeting entrepreneurs, completing commercial due diligence for prospective deals, market reports, liaising with the core business, assisting our invested companies with what ever I could as well as attending events, desktop research was a big part of my role.
Along with the methods outlined above, as well as using open resources such as Mattermark, CBInsights, Crunchbase, Pitchbook, F6S, LinkedIn, Angel List etc. as well as lead generation tools e.g. Data FoxI gathered data and attempted to bring some order to the chaos to create a structured deal flow.
These methods created a pipeline for prospective deals, however our approach was ultimately driven by human interactions. After all, as Olaf Jacobi of Capnamic Ventures eloquently put it, “startups are not just an asset which can be found and evaluated by algorithms”.
Our approach gave us a funnel, but people ultimately made the connections and sought to understand the business/ founding team before investing. Ultimately our approach was reputation driven and this was certainly not a short term play! We positioned ourselves with a unique value proposition and expertise within the energy-tech space and ensured that any deal delivered mutual value.
Two main things I looked for when evaluating companies:
- Founding team — balanced (not just engineering or just sales), technically brilliant — can deliver
- Business model that solves a real customer challenge — scalability, target focused