PS#080: Inbound & Outbound Sourcing

Over the past few weeks, we’ve discussed several different sourcing strategies, breaking them down into proprietary and nonproprietary deal flow categories.

Today, we are going to take a different approach, breaking those same strategies into inbound and outbound sourcing frameworks. This is just another way to think about how you’re going to capture deal flow.

So, what are inbound and outbound sourcing strategies?

• Inbound sourcing is deal flow that is sent to you.

• Outbound sourcing is deal flow that is generated by your outreach.

It’s akin to marketing leads (inbound) and sales leads (outbound). Both take work and consistent effort, just as we discussed in the ​initial issue​ of this series.

Alright, let’s get into the tactics of inbound and outbound sourcing.

Inbound sourcing.

You can think of inbound sourcing as putting a billboard out into the world for the type of deal flow that you’re interested in as an investor.

Just like billboards, you have to make sure that they are put in the right places and communicate the right message for those who will see it.

With that in mind, think about inbound sourcing with the following framework…

1. Identify potential sourcing relationships (the audience)

2. Clearly communicate your strategy and investment interests (the message)

3. Schedule regular cadences for sharing your strategy and investment interested (the frequency)

If you follow this framework of audience, message, and frequency, you’ll be able to build a strong inbound sourcing engine in no time.

So, what are some examples of this in action? Great question.

I like to think about this in two buckets, publicly and privately…

• Publicly: This is all about building and sharing in public. You can leverage a newsletter, blog, social media, etc. to get your message out to the right audience. Each of these mediums has different nuances, but they’ve all been proven to be effective.

• Private: This is more about those closed door conversations. Not every investor or ecosystem conversation will lead to a deal immediately. Sometimes, you’ll need to just make sure that the individual has your investment interests top of mind. Then, when the right opportunity comes along, they will think to share it with you.

Whenever I talk about inbound strategies, everyone thinks about social media. And for some, that’s a scary concept. Believe me, I get it.

Yes, social media is a great form of sourcing and brand building. It’s been used effectively by tons of investors. BUT, there are also lots of investors who have done incredibly well without leveraging social media at all. There are many ways to win at this game.

Personally, I didn’t use social media to build my brand and reputation in the market. It just wasn’t for me. Good news is that it hasn't stopped (or slowed me down) at all.

Outbound sourcing.

Outbound sourcing is proactively generating deal flow through your own outreach.

This is actually a really, really important skill to develop.

I call this out because a lot of you have or will join firms that have a great inbound deal flow. They already have a strong brand in the market and your job is simply to review that inbound deal flow.

While that is great, don’t let that keep you from developing this skill. If you want to succeed long-term in this industry, you’ve got to be able to develop your own deal flow.

For outbound deal flow, I leverage the following framework (leveraging some of the strategies we discussed previously)...

1. Schedule time, a lot of time, regularly

2. Disconnect, think, and go down the rabbit hole

3. Collect and organize information (i.e., create lists of startups, collect & build market maps, identify relevant investors, build ecosystem relationships, track conferences, etc.)

4. Break this down into potential targets and relationships

5. Schedule time for outreach

Essentially, schedule time, think through your theses, leverage the six sourcing strategies, boil this down into your targets, and get to work reaching out to those startups or relationships.

It sounds simple, but the hard work is in doing this consistently.

For both of these frameworks, the key is consistency. Iterate as you go and learn more about your investment theses. Each conversation will add another layer of depth to your thesis and knowledge about the space.

It’s all frameworks and processes.

At the end of the day, it all amounts to the same thing – finding great investment opportunities.

I use these different frameworks to help me break down that big goal into smaller, tactical steps. Sometimes I think in terms of proprietary or nonproprietary deal flow, sometimes I think in terms of outbound and inbound sourcing, and sometimes I just spin the wheel to pick out one of the six strategies.

The point is that I try to make this an everyday activity. I want to fill my deal funnel with as many high quality opportunities as possible.

That starts by putting in the time, effort, and reps. Good luck and happy sourcing.