The Genius of Venture Capital (Part 2): Deal Flow

The venture capital (VC) process comprises several distinct stages. The first two are: deal flow, and deal selection.

This post focuses on the deal flow stage.
Venture capitalists (VCs) gather applications from companies that are seeking funding. This stream of investment opportunities is called deal flow. The higher the deal flow, the more likely that the VC can fund promising ventures.

VCs, on average, spend about 40% of their 55 hour work week on deal flow.

VCs, on average, select about one per cent (1%) of their deal flow to fund. So the deal flow has to be quite intense.

The big question, then, is where do VCs find the 100 potential candidates that enables them to focus on one? In other words, what is the well spring of the deal flow?

The answer is: their network.

So the focus of this post, actually, is on networking. Specifically, the focus is on how VCs network.

Let’s get started.

Authors of a recent Harvard Business Review article surveyed more than 900 VC respondents on a variety of topics, including deal flow. According to the survey respondents, the best deals come from their network, which includes other investors, former colleagues, successful entrepreneurs, and university professors.

None of this information will be found in any database, no matter how specialized it may be.

The ultimate question, then, if you are not already well connected, is … how do you become well connected?

Stay tuned to this blog.

TIP #1: Google how do venture capitalists network

TIP #2: Explore the firms mentioned in articles of interest … for example …
Burgiss Manager Universe (https://www.burgiss.com/)
CB Insights (https://www.cbinsights.com/)
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Jean Steinhardt served as Librarian, Aramco Services, Engineering Division, for 13 years. He now heads Jean Steinhardt Consulting LLC, producing the same high quality research that he performed for Aramco.

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