Tips To Improve Your Proprietary Deal Flow
Private equity firms, venture capitalists, accelerators, angels, and crowdfunding platforms all have one thing in common—they’re looking for a unique business with proven positive results.
Keep Your Targets Engaged
Business owners seek assistance in addressing difficulties and tools to help them expand their businesses more quickly. Many people have recognized that money is only one part of the puzzle. With a broad list of corporations eager to contribute funding, PEs must discover methods to be more than simply money in order to stand out.
In today’s market, PEs must provide value beyond and frequently before finance in the form of access to resources like experience, expertise, and technology in order to acquire unique deals. Being a good partner and a known resource for a business owner enhances the likelihood of a proprietary deal, sometimes years before a deal is even explored.
Identify Opportunities Directly
The goal of a proprietary deal flow is to be the only firm competing for your target company’s attention. While middlemen can be very valuable in discovering opportunities, their primary strategy is to engage many organizations—the exact reverse of the purpose of a private deal flow.
When searching for a specific deal, direct deal sourcing should be your preferred strategy. This will enable you to constantly pursue companies that meet your investment requirements and provide you with the best chances of success.
Create Bespoke Scoring Models
Scoring is another option to improve the efficiency of your proprietary deal flow. One must set guidelines that reflect your firm’s optimum match, these models help reveal the types of businesses that will be successful investments for your firm.
While simple models are frequently available, companies now rely on cutting-edge technology to integrate many data sources and apply data science capabilities to develop their own. Ensuring that your scoring models are tailored to your company’s needs can benefit the companies your firm identifies, resulting in a healthier and more filled pipeline.
Utilize New Technologies
The most recent advancement in private equity deal sourcing strategy has been to use software and technologies to source opportunities and inform a firm’s decision making at all levels and throughout its portfolio firms.
According to a recent Factset Report, 85% of CEOs believe technology is playing an important role in determining the future of the industry. Among technical leaders, this figure climbs to 98%.
Your firm must develop a tech stack. According to Boston Consulting Group (BCG), your tech stack should include deal sourcing and origination platform, customer experience metrics and analytics tools, and social media monitoring tools.
Using technology can help your firm find patterns in a specific market and understand how the industry landscape is moving with the correct data. These and other indicators are useful in determining the quality of private equity deals.