A: Sometimes you have to get creative. Most times? Its just knowing where to look and being disciplined.
Sourcing is either inbound or outbound. Inbound deal flow takes a while to establish but can be incredibly powerful. Outbound sourcing takes constant attention and effort. I’ll explain.
Inbound deal flow is when entrepreneurs either approach you directly or someone in your network introduces or refers them to you.
Any company that comes to us at Hyde Park VP will be looked at. However, the method may determine the priority and urgency of analysis and response. For example, we likely will set up a meeting with a company that one of our LP’s (the folks that invest in our fund) introduces us to fast than one that contacts us through our website. Additionally, if another VC, entrepreneur, or contact in the industry let’s us know about a company, we’ll move quickly. (Now, all things considered, setting up an inbound deal flow machines take a lot of time and curated activities. I’ve been lucky to join Hyde Park and take advantage of an already strong and growing brand.)
So what does this mean?
For entrepreneurs – Find a way to get a warm intro. Look on LinkedIn, go to strategic events, you know the drill. But, if you can’t, just brute force your way into a meeting. Once you’re in the meeting, everyone is on the same footing. If you’ve got a great company, how you got the meeting won’t matter and in some cases, it could reflect highly (e.g. your sales capabilities).
For VCs or those interviewing – see who you know that isn’t necessarily in everyone else’s network and find out which companies they know or track. For example, I still keep up with my former colleagues at an IoT company. Some of them look at startups from a corp dev perspective and some from a partnership or ecosystem perspective. They could know about companies that haven’t hit us yet, because we’re coming at “sourcing” from a different perspective.
Outbound sourcing is when VCs find a company and contact the CEO directly. Many time, its via email.
First off, there are the “easy” ways of finding companies, especially as you move to later stage startups. There’s a much bigger track record and backlog of press, funding announcements, social media blasts for later stage companies. So these methods?
- Funding announcements – Term Sheet, StrictlyVC, Crunchbase, Pitchbook, Inside VC, FinSMEs, CBInsights, VC Tech Daily, and the list goes on. Many daily newsletters include both funding announcements and news on tech (an even longer list)
- Awards lists – Mostly centered around communities (geographies) and are either locally published lists of “best office” or “greatest place to work” or they’re actual awards events
- Startup databases – AngelList, Crunchbase, F6S, CBInsights, Pitchbook (see some overlap?) attempt to include most, if not all, startups
Keeping on top of these sources requires some rigor, but is usually table stakes for most VCs that engage in outbound sourcing or are simply staying on top of what’s going on in the industry.
Then, there are the other, more laborious and manual methods of trying to find early-stage companies that aren’t necessarily hitting the popular channels. Looking at new hire announcements, reading online reviews, scouring local news twitter feeds. Much more relevant for seed and early A companies.
And the meaning?
For entrepreneurs – the local press-stuff matters. Not necessarily for evaluating your company, but for finding you. Obviously, can also be helpful in attracting talent or providing reference for customers.
For VCs or those interviewing – look local and see what you can find that isn’t getting picked up in VCs normal sourcing methods. Job postings, new office openings, small business or technology grants, tech transfer at universities, etc. During my interview at Hyde Park VP, I used local newspapers in smaller startup ecosystems as a way to find new companies.
And then there’s the other stuff… accelerators, demo days, mentoring, having “boots on ground” that fall somewhere in the middle.
It’s all grey area anyway, right?