The industry benchmark is 300:1, which means that you are screening 300 deals to select one if you are a disciplined investor. So building a high-quality deal flow requires a methodical approach.
There are many deals on the “Street” as we say that are looking for capital and as high as 80% are not investable, to say the least, so where you are sourcing your deals from has a critical impact on your success.
There are few ways you can jump-start your process and we are listing them in order of importance:
- Join an Angel Group or Syndication
- Allocate capital to an Angel Fund
- Incubators and Accelerators
- Connect to your local startup ecosystems
- Participate in as many startup pitch events as possible
- Attend large startup conferences
As much as we as humans, always looking for the right answer or learning what to do, learning, or knowing what NOT to do, has an important effect on one’s ability to perform.
So, here is some recommendation of what NOT to do:
- Search for deals online
- Invest through the online various platform, especially that you are not familiar with
- Accept email pitches from strangers and screen them on your own
- Invest based on the recommendation of inexperienced or not credible sources
- Accept the information provided to you at face value.
The quality of the deal flow is in direct correlation to the sources from which the deals are coming from. There is an underlying sentiment in early-stage investing that we call “follow the money”; it refers to deals that already have other experienced investors in it.