2023 dealmaking in numbers

When we asked Martin Lehmann, senior associate at Verve Ventures, about how the market has shifted over the past two years, he said, “There’s been a lot of excess, and we’re in the hangover phase. The only difference is that we’re out of aspirin, so we’ll need to wait for the headache to wave off slowly.”

It’s inevitable—deal sourcing this year is going to look different than it did before. We wanted to communicate exactly how, so we worked with UserEvidence to gather data from hundreds of top private capital and investment banking professionals about their strategies for the year ahead. 

Read the full report with expert advice, or keep reading for a snapshot of 2023 dealmaking in numbers.

6 ways dealmaking will change in 2023

Our questions for dealmakers came down to three things:

  • How the investment landscape will change in 2023 (if at all)
  • How dealmakers will differentiate their firms in 2023
  • Whether dealmakers feel optimistic or pessimistic about 2023

The results are in and analyzed. Read on to find out how your peers plan to tackle the months ahead, where they’re spending resources, and how your own firm’s strategy stacks up.

How dealmakers will spend their time

When asked how they plan to spend their time in 2023, 39% of dealmakers said they’re going to prioritize new deal prospecting. Portfolio support came in second at 23%. 

A graph outlining the activities VCs plan to spend time on each week, leading with new deal prospecting

Why does this matter? Because a common narrative for 2023 is that VCs are going to focus primarily on their existing portfolio. 

The reality, however, is that increased competition and a focus on paths to profitability means investors are working harder to gain access to a smaller pool of quality startups. They’re also working to reset their portfolios away from startups in sectors that aren’t performing. 

As Ray Zhou, CEO at Affinity, explains, “The contradiction of the private capital investing market, especially in venture capital, is that there is a huge amount of capital to be deployed on a schedule set before this year’s turmoil—but investors are all chasing the same ‘safer bets.’ We see the investors who are successful building their network, increasing their dealflow, and resetting their portfolios for a very different environment.”

Who investors will focus on

Despite new deal prospecting as a priority, 51% of dealmakers also said they’ll be working most with business partners they already have relationships with. 

In terms of what this will look like as firms prioritize their relationships, Scott Hozebin, managing director at MetaEquity Partners, says there will likely be “pull back on offers, pull back on valuations.” He also recommends that firms “focus on disruptive technologies but with low risk tolerance. Move towards diversifying risk in fund design through a greater number of placements.”

A graph showing that 51% of people will place more importance on working with business partners they already have a relationship with

How long it takes investors to qualify deals

A primary focus on existing portfolios alongside a resource investment in new deal prospecting may seem counterintuitive, but it makes sense when you realize how many hours it takes to qualify a new opportunity. According to our results, the average investor spends 34 hours researching a deal, with the majority spending at least 15. 

Ray Zhou explains, “The shift to lower risk startup deals (smaller dollar deals in more reliable sectors) and away from growth means VCs are spending way more time sourcing deals and building their network. It’s a big change away from the ‘one-day close’ trend of 2021.”

A graph showing that the average investor spends more than 15 hours researching a deal.

If you want to save time on qualifying deals, our relationship intelligence extensions can help. Here’s how:

  • Access relevant CRM information about people and organizations directly within your Zoom calls with Affinity Meetings
  • Accelerate sourcing with enriched relationship intelligence across Chrome and Gmail using Pathfinder 
  • View relationship intelligence and contact data, and add to your CRM with Affinity for Outlook 
  • Manage your workday and update relationship context on-the-go with our mobile app

Where deals will come from in 2023

It’s no surprise that most firms are ready to hustle—46% of them overall expect most of their deals to come from outbound outreach. 

A graph showing that 46% of dealmakers think deals will come from outreach efforts.

But the amount of hustle seems to be deeply connected to the size of the firm. Our data revealed that while only 33% of large firms expect most of their deals from outbound, 62% of smaller firms expect the same. SMB firms will be the ones to watch in 2023, to see which grow as a result of their efforts. 

How investors will use data in 2023

As firms look for new ways to differentiate themselves in 2023, data and how it’s used is becoming a more important part of the dealmaking process. 

First, when evaluating a deal opportunity, most firms (76%) use at least four data sources. But when we took an average from the entire sample, that number jumps to more than five.

A graph showing that 51% of investors using 4-6 data sources when evaluating a deal.

When we asked firms how they plan to use their data, answers were all over the map. While most firms are using data to more thoroughly qualify deal opportunities, relationship management and more efficient prospecting aren’t far behind. 

A graph showing the many ways that data will be used in the future for dealmaking, starting with qualifying opportunities

Whether investors will change their plans in 2023

There’s no consensus on what funding rounds will look like in 2023. Just over a third of investors (36%) think there will be fewer investments, but almost as many think there will be the same amount or more.

A graph showing that there is no consensus on how deal volume will change in 2023

Given the uncertainty, we sourced a good balance of optimistic and pessimistic takes on 2023. One anonymous pessimist said, “The market will continue to decline for 6–12 months, and then we’ll see a massive wave of consolidations, failures, and M&A beginning in the summer of 2023.”

But the good news is that most investors are maintaining a sense of optimism about next year. One anonymous optimist put some of the doom and gloom into context when they said, “Q1 2023 will be busy. But there will be a mixture of businesses who should have raised in 2022 and haven't, and are therefore close to distress versus companies who have decent runway but realize they can dominate the market if they raise again. The former will be far greater than the latter. Also expect the secondary market to remain buoyant with trades happening at material discounts.”

Regardless, in tough times firms are forced to differentiate so they come out on top. If you’re looking for more advice on how to strengthen your venture capital or private equity firm for 2023, read Affinity’s 2023 Investment Predictions Report

Here are five things you can expect from the report:

  1. Advice from experts on how to prospect more efficiently
  2. Predictions for how the investment landscape will evolve in 2023
  3. An analysis of current deal flow, and how firms plan to spend their resources
  4. Evidence-based recommendations on what venture capital firms can do to stay ahead of market changes
  5. An answer to the question: Should we feel optimistic about 2023?

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