In the world of Private Equity and Venture Capital, face-to-face meetings play a crucial role in deal origination and closing. Sitting in the same room, investors, entrepreneurs, CEOs, and investment bankers brainstorm ideas, gauge each other's body language and chemistry, and make decisions on capital investments, mergers, or acquisitions. Although COVID-19 has upended all that with its new norm of social distancing and virtual meetings, the show must go on, especially with the $1.5 trillion in dry powder that investors are eager to put to work.
Here, then, are four tips on how to navigate deal origination without meeting in person:
What you could earlier achieve through in-person meetings, you must now compensate for through more upfront research. While data on public companies is scattered across the Internet, investors need a reliable source for information on private companies, and their owners and managers.
This is where a well-designed, technology and AI driven data aggregation platform can supercharge your deal flow pipeline with target companies that match your investment thesis.
Ideally, your private company deal origination platform should:
Most folks have been pleasantly surprised by how productive they can be when working from home. Moreover, businesses are realizing the time, money, and stress reduction benefits from not having employees drive to airports, sit on red-eye flights, sleep on hotel beds, endure jet lag, etc.
As a result, expect to see more virtual meetups and conferences, and a rise in webinars.
To thrive in this new paradigm, investors should select an information platform that also tracks virtual events and virtual attendees. If the platform offers good search capabilities, you could develop a targeted list of people to speak with, reach out to them through CRM integration, and connect over video conferencing.
In addition, Private Equity, Venture Capital and investment banks could organize their own webinars, online conferences, and virtual fireside chats at minimal cost, in small formats, and with only a few select invitees. This way, interactions can be more meaningful and productive than stealing a few minutes on a noisy and crowded conference floor.
With smart, cloud-based deal origination platforms, researchers at Private Equity, Venture Capital and Investment Banking firms can significantly cut down the time they spend on finding information on private companies - from weeks of manual labor to perhaps a few hours with the right private company information sourcing platform.
In addition, your private company information platform should leverage the wealth of information on social media and job review sites (such as Glassdoor) to develop accurate avatars of key decision makers, using AI and human judgment to hone profiles.
Moreover, with the right platform, you could leverage time spent away from the office to be more structured in your vetting and outreach.
Investors often spend years nurturing contacts before doing a deal. With Coronavirus' safe distancing guidelines in place, Private Equity, Venture Capital, and investment bankers need to find other ways to stay in touch. This is why you need an information platform that offers robust CRM integration.
With APIs, your knowledgebase should seamlessly connect with your CRM or custom software system to help you proactively reach out to key decision makers, share ideas and deal-related information, and keep your connections alive, albeit virtually. Any good CRM system offers built-in email templates, relationship tracking, and automatic tasks, so you can maintain relationships with your CRM acting as a digital personal assistant.
There is a silver lining to this COVID-driven inability to meet in person.
Data shows that, over the past 15 years, Venture Capital funds have underperformed the S&P 500 index. Part of this could be explained by a surprising bias in venture capital that impedes rational and objective investing. Hence, an argument could be made that the inability to have face-to-face meetings may actually improve the quality of deal origination, and your investment returns, going forward.
Without in-person handshakes, one way of compensating for your gut feel on personalities is reaching out to people who know or have previously worked with folks you cannot meet in person. This has the added advantage of keeping your intrinsic biases away from influencing investment decisions.
A well designed information platform should include a "People" module, with a list of connections - current and former co-workers and bosses, investors, LinkedIn contacts, and more - who you can speak with to get a much better understanding of an individual's skills, competencies, business ethics, and character.
If your connections overlap and are in the same geography as your targets, you could enlist mutual connections to act as advisors for tasks that are best done in-person, such as walking a manufacturing floor, visiting a distribution warehouse, or "warm calling" on key decision makers whom your advisors already know.
In time, a good number of Private Equity and Venture Capital investors, and investment bankers may well find that virtual deal origination matches, and even beats, in-person meetings. With a massive hoard of dry powder waiting to be invested, the time and cost savings of operating in a virtual world - with the right deal origination platform - could empower dealmakers to rapidly scale-up private company screening, and get a lot more deals done in 2020.