PS#078: Strategies for Nonproprietary Deal Flow

​Last week​, we discussed a tactical approach to sourcing, including the six different strategies.

Today, we are going to dive into the nonproprietary strategies highlighted, including…

• Databases

• Conferences

• Internet searches

• Universities, incubators, & accelerators

Now, it should be highlighted, just because these are nonproprietary deal flow channels does not mean they can’t produce great deal flow. As investors, it’s our job to be exhaustive. We should be “looking under every rock” so to speak to find our opportunities.

For the rest of this post, we’ll run through the thought process and time management for each.

Without further ado, let’s get started.

Databases.

Databases include Pitchbook, Crunchbase, Grata, Harmonic, etc.

These are (typically) paid databases that share some level of data (e.g., fundraising history, financials, investors, etc.) on companies, including startups.

This is the vertical I hear about the most from aspiring investors. It often includes a concern that they won’t be able to source without access to these platforms.

Good news! Not only is that not the case, but you’re not going to find any proprietary deal flow here. Generally, if you find a startup in one of these databases, a lot of investors are already following them.

But, remember, just because it’s not proprietary doesn’t mean it can’t be a high quality deal.

Databases are a great place to get started. You can build your initial list of companies and start building out a broader market map of the landscape. It can help you think through new ideas and explore investment theses. If you find a company that fits your mandate (whether through the database or otherwise), it can help you find similar companies (i.e., most of these platforms are now using some form of AI to find similar profiles).

All and all, it’s a great resource.

My recommendation is dedicate time on a weekly basis to explore these databases. It will help fill out those market maps and make sure all your bases are covered.

Now, I know I said “paid” at the beginning. While most of these are paid, the freemium versions are often enough to get started. For example, I built a lot of my sourcing lists with a free version of crunchbase when I was getting started.

If you do want to get access, there’s a couple other strategies that you can take, including…

• Accessing through a school account (or similar institution)

• Requesting a trial account with the platform

Most VC investors are operating on a shoestring budget anyways. So, this kind of creativity may come in handy even if you’ve got a full-time role in venture capital.

Conferences.

In the ​last issue​, I listed conferences in the proprietary and nonproprietary categories.

This one has some alpha in it from a proprietary perspective, if deployed correctly. But, we’ll discuss that in more detail in the next issue. For now, let’s talk about the nonproprietary version.

There are a lot of events and conferences in the VC ecosystem. It’s a major business unto itself.

You’ll find everything from wide-ranging, general VC conferences to industry or technology-focused conferences. They will be jam packed with investors and startups, creating a great opportunity to engage in person. These types of conferences can make it really easy to set up a ton of meetings with startups and investors focused on your areas of interest.

However, on the flip side (and as mentioned) there are usually a TON of investors in attendance. This means it’s highly unlikely that you’re going to find any sort of proprietary deal flow. More often than not, you’re using these events to spend time with startups you’ve been tracking for a while.

My recommendation is to spend some time researching these conferences at the beginning of the year and check in quarterly to see if new ones have been added or changed. Identify the ones that are relevant to your efforts and decide on which ones you’d like to attend.

Even for the ones you don’t attend, there’s still a lot of value in knowing when they are happening throughout the year.

A few pro tips…

• Requesting attendees: If you reach out to the coordinators of the conference or event in advance, they will often be able to share some list of attendees. This can be a great way to plan your approach (if you’re attending) or allow you to reap some value (even if you’re not attending).

• Outreach: You can also use this in your outreach to schedule meetings around the conference (if you’re in town), or to simply engage or reengage with a startup.

Again, if leveraged correctly, it can provide a big boost to your sourcing (even if it’s not proprietary deal flow).

Internet searches.

Ah, the internet rabbit hole.

A key part of any successful sourcing approach. As with most things in life, sourcing requires a bit of serendipity and luck.

You’ll help increase your “luck surface area” through a lot of these strategies (i.e., attending events, conferences, investor meetings, network relationships, etc.), but research provides a lot of the fodder.

I think it’s important for investors to block out time for exploration.

The internet is an incredibly effective way to start your explorations. This could include researching and exploring different theses, newsletters, blogs, startup websites, Linkedin connections, slack/discord groups, forums, etc. In doing so, you’re building your knowledge set of the area in question. It allows you to not just potentially identify startups, but helps build your foundation for effective conversations and discussions.

My recommendation is to make this a daily occurance. Starting out in my career, I blocked time every day (typically in the early morning) to explore. It made sure that I had time to both research and think through my theses and sourcing efforts.

Today, you have access to LLMs (e.g., OpenAI's ChatGPT) that can make this even easier. Just remember, if ChatGPT told you, it has probably told other investors as well.

The internet is a great place to find new opportunities, but it is available to all (which I suppose is the beauty of it).

Universities, incubators, & accelerators.

Finally, we have universities, incubators, and accelerators.

Historically, this might have fallen in the proprietary camp, especially when identifying young founders on university campuses. However, today, this has been mostly institutionalized. Most universities are catering (in some fashion) to entrepreneurs looking to build businesses. You can find TONS of incubators and accelerators across the world, even multiple on the same campus.

With that being said, this is a great place to find startups early on their journey.

My recommendation is to build relationships with these organizations and regularly check in with them on their cohorts of startups/founders. Most of them will have some formal program that leads to new “batches” of startups periodically.

Of course, remember that these programs are also businesses, providing a product of their own.

The value proposition hinges on two main offerings: (1) helping founders launch a business, and (2) helping them raise capital. The second one means that they are often speaking with lots and lots of investors about the startups in their program.