Deal flow is the life blood of any fund.
Finding quality sources of deal flow takes time, but it becomes a cheat code for VCs once it’s figured out. It allows investors to be pickier, allocate capital into better companies, and generate better returns. If deals are slow to come by, capital becomes harder to allocate, more time is spent originating, less time is spent evaluating, and returns will suffer.
Getting deal flow is easy, but getting the right sources of deal flow is the difference between an average investor and a great one. At the end of the day, venture is an access game, and you are evaluated by the allocations you’re able to secure.
If you want to take your access game to the next level, here are five ways to get better deal flow as a venture capitalist.
Find Private Online Communities In Slack, Discord, And Reddit
Finding the right online communities is a requirement to finding quality connections. Massive amounts of value are being shared in these different pockets of the internet, and these online communities make it easier to reach out and get in touch with the right people (If you’re looking to join better investor communities, we’re one of them).
Reddit’s r/startups sub is a good place to start; it’s active and engaged members, and most of the group consists of founders looking for help with their businesses. The /r/venturecapital group is another group that is meant more for investors, and there are some good opportunities that come through there.
Indie Hackers is an online community that has a bunch of engaged founders, but as the name suggests, most of them have decided to run their business without venture capital, and they won’t be interested in taking calls with investors.
Slack and Discord groups are a great place to look for signal, and a lot of founders keep these open all day while they work. Here’s a list of 100+ Slack groups for founders that you should join if you’re looking for better access to these types of people.
A general rule of thumb is to always be adding value before asking for value within these groups. If you start using online communities to solicit offerings, you’ll either get banned or ignored, so don’t do that. Offer up value, share things you’re learning, ask and answer questions, and build authority within the group. Once you’ve done that, you’ll find that luck starts to gravitate to you more often.
Take Note Of The Companies That Are Advertising In Niche Parts Of The Internet
If you’re looking for more deal flow, another option is to become observant of what companies are spending money on advertising in niche parts of the internet. Advertising tells you something about a company’s marketing budget—and its ability to grow.
You should evaluate a business by where it invests into growth. If you see a company advertising, it means they are pouring money into customer acquisition; if you see that company advertising into niche markets, it means they are being thoughtful with their ad budget.
If you find a company with an ad budget, reach out to them via email, Twitter, or LinkedIn, and see if you can learn more about their business.
Leverage Twitter To Share What You’re Working On / Interested In
Twitter is a great place to meet new people and get your name out there. Use your Twitter account to share what you’re working on, who you’re meeting with, and what you find interesting. Don’t use it to pitch anything, and you’ll find that people pay attention to those with shared interests.
This can lead to introductions and other opportunities. It also gives companies more of an idea of your competency if you’re sharing value.
There is a ton of noise on Twitter, so you’ll have to be selective with what you follow, but you’re missing out if you aren’t leveraging it for deal flow.
Follow Niche Newsletters And Start Taking Note Of The Products Used / Recommended By Writers
Follow newsletters and start taking note of products used / recommended by writers. These writers usually see and use a lot of different products, and they have valuable insights worth tapping into.
Many of these newsletters eventually start taking advertising when they get to a certain audience size, so take note of the companies they work with.
Befriend A Handful Of Analysts/Associates / Principals At Other Top Funds
Typically the best deals come from connections within the industry. A network is your most powerful asset, and it’s important that you use that to your advantage.
For the most part, investors love to talk to each other. They’re also all playing the same game, and they are incentivized to do everything they can to increase and improve their deal flow sources.
If you’re already working in venture, start reaching out to other people in a similar position to set up quick calls to trade notes and deal flow. You’ll be able to gauge who is worth staying in touch with during the call, and if it makes sense, set up recurring invites with those that you want to continue sharing deal flow with.
As a heads up, the law of reciprocity applies, and this only works if you are providing as much value as you are prying for.
At the end of the day, getting good deal flow isn’t rocket science.
Improve your information diet, start following and reading the right people, become more observant, provide value, build a presence on the internet, build trust with others, and the rest takes care of itself.