Finding the best deal sourcing techniques is the missing piece for many venture capitalists, investment bankers and private equity companies. Deal sourcing, also referred to as deal-originating, is the process that identifies and selects the most lucrative investment opportunities.
Businesses employ various firms to leverage their top deal origination strategy services to help them increase conversion rates and get the highest ROI.
Finding the most effective deals sourcing strategies for your portfolio begins with understanding your goals along with the avenues you are currently using to discover new opportunities. After assessing your current process, look over the top deal-sourcing strategies to further analyze, research and get in touch with companies worth investing in.
Inbound vs Outbound Deal Sourcing
Inbound deal sourcing involves transactions that enter the firm via its diverse relationships and network. This includes channels like personal referrals, portfolio member recommendations, or emails sent to founders.
- Inbound deal sourcing helps save time and money in the beginning stages of the deal’s origination process.
- Leads may be pre-qualified or are “warmed up.”
Outbound deal sourcing refers to steps a company takes to identify and communicate with potential deals. This deal-sourcing method involves preparing an inventory of potential promising leads and calling them directly. A majority of firms can provide a team dedicated to this strategy.
- Companies can take charge of the quality and quantity of businesses they offer, resulting in a more regular and quantifiable deal flow.
- Outbound deal sourcing provides the chance to discover promising companies earlier in their lives, long ahead of the competition, paving the opportunity for a robust exclusive deal flow.
- Teams can concentrate on finding opportunities that align directly with their goals and investment theses, thereby increasing overall conversion rates.
Relationship-Driven vs Data-Driven Deal Sourcing
Deal sourcing based on relationships involves using your own and extended networks of relationships to identify opportunities. While relationship-driven deal sourcing typically has a lot in common with deal sourcing inbound, however, there are some important distinctions.
Inbound deal sourcing is the term used to describe any leads that come in, regardless of whether they originate through existing connections or founders looking for investment. Relationship-driven deal sourcing refers to any outbound or inbound deals based on a network connection.
- Best of Bootstrapped, founder Joe Brown of DearDoc claims that owners and operators will be more inclined to agree to the opportunity to meet with you when you have an affinity, regardless of how small or insignificant.
- A shared network could provide information that could help companies develop more customized interactions with opportunities, which gives them an advantage in the market.
- Deals driven by networks usually move more quickly than other types of deals since introductions tend to be warm and occur by companies actively seeking investors.
As the name implies, data-driven deal sourcing uses the information to find appropriate investment opportunities before contacting or establishing a connection with them. It is typically employed in outbound campaigns and is most effective when employed in conjunction with relationship-driven or in-person deals methods for sourcing.
- Researching leads to qualify leads can save companies time by preventing them from investing time in leads that don’t match their investment thesis or sector specifics. This also helps ensure higher efficiency and conversion rates.
- Data-driven deal sourcing makes it possible to find existing network connections and connections with highly relevant businesses.
- Data-driven deal sourcing involves gathering the data required to create targeted outreach and pitches to each client, making your business stand out from the crowd.
In-Person vs Online Deal Sourcing
In-person deal sourcing can be defined as any lead your company creates by interacting with potential investors. The most popular method for deal sourcing in person is to attend trade shows and industry conferences.
- Of all the deal-sourcing strategies listed here, In-person deal-sourcing is the best and most lasting impression on potential customers.
- Face-to-face interactions help build trust and establish relationships more quickly than digital interactions.
- If used in combination with data-driven deal sourcing, In-person sourcing can be highly efficient.
Companies increasingly rely on online deal sourcing, increasing as technology advances and digital transformation begins to take hold.
- Deal sourcing online for private equity allows firms to search for opportunities that match their objectives.
- It’s less expensive to conduct research online rather than in person, and it reduces the overhead expenses, such as having to pay special sourcers to handle the origination of deals.
- Deal sourcing online can efficiently identify individuals before events and meetings in person, which makes it an effective option, or with one of the other strategies listed.
Deal origination is critical to any business’ performance. The good news is that East Africa’s leading legal consulting firm, the Shikana Group, is there to help with deal origination.
Shikana Group has experience assisting companies with deal origination strategy services and managing their M&A pipeline.
Our purpose is to ensure that our clients prosper, and we achieve this by offering unmatched, insightful, and relevant legal expertise and investment advisory services.
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