One of the things I enjoy most about my daily professional activities is finding the right opportunities to help companies and individuals with their success. The term that I hear most often thrown around is ‘deal flow’. Whenever I meet with investors, angels, VC’s, or family offices and I mention that it’s so important to have good deal flow I am universally met with a nod and smile of acknowledgment.
In using the term ‘deals’ I paint with a broad brush. Deals can be simply finding the right investor for a hot opportunity and we (along with our team) may or may not work on the brand and marketing side although my favorite deals do involve both aspects.
As any good salesperson will tell you, having a deep pool of good opportunities is a key to success. I’ve written about the idea of making the most of those opportunities. Deal flow is obviously different from finding good sales opportunities as frequently matchmaking skills are employed. Bringing good people that have good ideas together with the right investment partners is tricky business.
Maintaining good relationships with entrepreneurs and even established companies seeking growth capital, along with various investors as described requires a delicate balance of putting the right people and right potential deals together. If you show an investor a few deals that do not match up well with what they like to do, you run the risk of losing the confidence of that investor. Correspondingly, putting the wrong investor together with an entrepreneur and or company seeking capital also can cause a loss of confidence and simply be a waste of time.
How do you know the difference? You watch and learn from people you admire, you read a ton of stuff on the subjects, and most importantly as far as I am concerned, you continually keep in mind the personalities and desires of all of the stake holders. I always go through the process of thinking how a meeting will go when I put people together. What is the best outcome? What is the worst outcome? Will a review of concept and subsequent discussion (whether by phone or in person) be worth everyone’s time? If I am not sure then I back off.
Keeping track of every deal should be a detailed and organized process. It’s no surprise that most deals take time occasionally there are quick ones). Since the deals are at varying stages of development given the many contingencies, staying involved, interested and in touch becomes important to all the stakeholders. Often times it’s go, go, wait, wait, wait, wait, wait and then GO NOW! You need to be in touch so that you are not caught by surprise when tides change.
What about success rates? Well in my experience there are way more dead ends and even a few blind alleys than there are successes. But if you personally believe in the mission of the company and of the potential of their success, you have the best chance to add value while knowing you can’t win them all.
Deal flow. It’s all about deal flow. Happy hunting.
I very much enjoyed your post, as the almighty “deal flow” has been highly relevant throughout my business career. I would also add “probability” to the list of key concepts critical when you are running your own advisory business. The ability to successfully triage the “more likely’ from the “improbable” deal can save you when the deal flow is thin and you need that closure or when the flow is high and opportunity cost higher. This skill requires discipline, experience and a fair of luck, but when applied diligently can lead to the promised land of “sustainable cash flow”.
So true Tom (and thanks for the comment), that the ability to discern the worthwhile from the not worthwhile is equally important. Being bogged down in a deal ultimately going nowhere is one of the great time and spirit killers.