Proprietary Deal Flow is Dead. The Future of VC is Proprietary Insights.

Jonathan Lehr
Published in
5 min readMar 10, 2020


We’ve launched the “Making of a Manager” series to share our top learnings as General Partners building and scaling Work-Bench for the past 6+ years. Read on for more in our series.

The other day, one of our LPs asked me what I think about the concept of proprietary deal flow in today’s evolving venture landscape.

While years ago the notion of proprietary deal flow was at the heart of successful VC models, these days proprietary deal flow is dead as everyone becomes an angel investor.

In addition to well established angel investors who have been the mainstay of Silicon Valley, there are more funding channels than ever to get a company off the ground. These include:

  • The continued use of Scout Programs by leading VC franchises
  • The rise of Operator-led angel funds in the $3–5M AUM range like Worklife.VC, Shrug Capital, ChapterOne, and others
  • Current startup CEOs doing angel investing on the side (i.e. Superhuman’s Rahul Vohra and Mailjoy’s Todd Goldberg launching a $4M angel fund)
  • And a new one — startups offering to angel invest in employees who leave… as part of a recruiting pitch! (see the tweet below from Jack Altman)

A result of this ‘new angel’ capital is that investors can’t out-hustle each other to deals anymore. The ability to vet these deals through what we call “proprietary insights” has become more important than access in this world where almost everyone is a cousin, former coworker, or angel investor in #thenexthotstartup.

For anyone but the very top brand name firms, strategies need to be focused on building conviction in startups earlier than traditional metrics enable you to. Otherwise, as more money chases the same deals, it will be impossible to sustainably win high quality deals.

Developing Proprietary Insights — What’s Your Strategy?

With everyone playing the same game, how can you generate conviction earlier than others and prove enough value to earn the right to invest in the next category defining startup? At Work-Bench, we realized this meant creating a clear-cut thesis driven approach. The way we think about this is with our sector and geographic focus. We bet early on enterprise tech in NYC (and have been doing so since 2013!), when the $10B+ of aggregate financing that subsequently poured into our local enterprise startups was just a twinkle in VC funds’ eyes. Fast forward and NYC Tech 3.0 is a booming enterprise tech ecosystem.

Our strategy involves gleaning insights from our corporate network which enables us to diligence an enterprise startup in a thematic area of interest before other VCs “can.”

This is where the concept of proprietary insights comes into play. Whereas most enterprise VCs will assess a variety of common SaaS metrics in order to get enough conviction to invest in a company, at Work-Bench we can get conviction ahead of others by using feedback from our Fortune 500 buyer network as part of diligence.

This “invisible metrics” layer is incremental to all the standard work a VC fund will perform across evaluating a team, their product, their market, etc.

We can invest in enterprise startups pre-revenue because the feedback from our corporate network addresses things including if the company’s approach aligns with their use case needs, if the product architecture can scale to meet enterprise requirements, if their security controls will support highly regulated environments’ needs, and a lot more.

As an example, we invested in digital identity verification company, Socure pre-revenue in 2015. Before investing, we culminated proprietary insights by speaking to numerous bank executives who all shared the same pain around the need to increase acceptance rates for new account openings, while keeping fraud down. Traditional providers like Experian and Equifax couldn’t meet their identity needs, and Socure’s enterprise-grade product fit into existing workflows and instantly showed value. Like most enterprise startups, the early day challenge was the long sales cycle of selling into banks — because of our customer network’s feedback, we had enough ammo to invest with confidence ahead of revenue metrics and from our intros, Bank of America ended up becoming their first marquee customer.

Not only does our model provide us the feedback needed to invest with conviction earlier than others, but it also allows us to provide tremendous value to our potential startups through customer intros (their oxygen!) and support in closing large enterprise contracts.

Our model requires relentless relationship management with the Fortune 500 and a lot of work, but that’s what we’re here for :) As fellow corporate IT people ourselves, we actually have a lot of fun doing it!

Increasing Round Sizes Are Shaking Things Up — What Stage Is Your Sweetspot?

The SoftBank effect changed up our industry the last few years. Many established Silicon Valley funds raised massive war chests to compete. As companies have stayed private longer, newer players from the hedge fund and private equity world have begun investing earlier. The trickle down effect has led to enormous competition and valuation inflation as more people compete for deals. It’s a bit of a ticking time bomb where investors sneak earlier and earlier than their traditional comfort zone and where their expertise lies, and end up paying more and more for these companies with limited traction.

From our vantage point, the ballooning of Series A round sizes over the last few years has actually helped us. As Series A’s are now $15.7M on average according to WING Ventures’ research, it has created a sweet spot for us at the Seed II stage which my co-founder Jessica Lin has written about before.

As Jess explained in her post:

What this means for founders is that what used to be a $5M Series A is looking more like $10 — $15M Series A’s. And with those bigger rounds, of course, are increasing expectations on customers, ARR, and other company metrics. Whereas many deep infrastructure companies used to raise Series A rounds to continue building out product and then begin testing their GTM motion, that is often the goal of seed rounds today. Even for founders who have been very capital efficient with a $3M Seed I raise will likely find it challenging to make it straight to a $10–15M Series A.

While I wonder how things will shake out in Series B-D world, at Work-Bench we’re enjoying our sweet spot investing in Seed II where we can find companies with live products, but limited early go-to-market. This lets us get a foothold ahead of tier 1 Silicon Valley VCs, run our playbook of go-to-market strategy expertise, and then feed these to downstream investors with high quality NYC deal flow.

Other Industries Where This Can Work

As we survey the venture ecosystem, we’ve seen friends build specialized investment funds in areas like Real Estate (MetaProp), Supply Chain (Schematic), Regulated Markets (Tusk), and more.

This seems to me like the future of venture capital, and the exciting part is that it aligns really well across investors, startups, and customers in a rare win/win/win situation with all parties benefiting.

If you’re seeing other interesting, new models for focused VC out there, tweet at me.



Jonathan Lehr

All enterprise tech, all the time || VC @Work_Bench, Founder of @NYETM, and @KauffmanFellows Class 19 || I also tweet (a lot) about the @MiamiHEAT