The decline in venture funding this year has created a dramatically different landscape to the one dealmakers enjoyed during the highs of 2021. But with challenges come new opportunities to learn—especially from those with a track record of successful investments in all market conditions. Our 2023 Investment Benchmark Report: Global Unicorn Edition revealed three key characteristics of top-performing VC firms:
- They keep existing contacts warm with a high number of meetings and emails
- They prioritize deal flow quality over quantity, even when markets fluctuate
- They oversee a larger and always expanding network
To expand on these discoveries, we unpacked every workflow that leads to a competitive edge for firms still nabbing great deals. To get the full list of differentiator recommendations, read our new guide, Relationship Intelligence at Every Venture Stage, or keep reading here for the highlights.
Workflow #1: Deal sourcing—giving power to “data exhaust”
Why relationship intelligence matters for deal sourcing: In 2022, VC firms added an average of 41 opportunities to their deal flow per month. Every one of those opportunities represents hours of research, which is necessary for informed, nuanced decision making when choosing deals to pursue. Relationship intelligence consolidates all research and enriches it with more information to identify the most promising opportunities.
The competitive differentiator: Top VCs are properly leveraging what’s called “data exhaust” (information from their email and meeting communications) to score the strength of every connection. With no additional effort, even the most junior team member is able to find warm paths of introduction when they discover a deal worth pursuing.
Workflow #2: Due diligence—no crucial data lost
Why relationship intelligence matters for due diligence: According to PitchBook, “VC-backed companies recorded just $5.8 billion in exits during Q1—less than 1% of the record exit value generated in 2021.” This slowdown has an upside: more time to spend conducting due diligence. The thing is, due diligence happens in many different places: online, in meetings, and in email exchanges. Relationship intelligence brings all that data together and turns it into insight.
The competitive differentiator: Top VCs are using relationship intelligence to maintain a direct connection between their CRM, browser, and emails. They’re using these connections to update due diligence records in near real time, whether the source is an email thread on new company financials or market updates from a founder’s LinkedIn page.
Workflow #3: Deal management—automate relationship priorities
Why relationship intelligence matters for deal management: The average VC booked almost 25% more meetings in 2022 than the year prior. Without relationship intelligence to wrangle the aforementioned “data exhaust”, associates cross wires and duplicate work when deal information is scattered across different tools or lost in a meeting where no notes were taken.
The competitive differentiator: We mentioned above that top VCs oversee a larger and always expanding network. They can do this successfully with automation, specifically reminders based on relationship strength to reach out if someone loses touch. The touchpoint is then logged, which means every associate across the company knows about it. Wires remain uncrossed, and the firm’s reputation remains intact.
Want to know what deal management looks like with advanced analytics? Read the full Relationship Intelligence at Every Venture Stage guide.
Workflow #4: Portfolio management—from passive to active
Why relationship intelligence matters for portfolio management: Your team’s collective network is connected to the needs of your portfolio companies—this is crucial for an exit or IPO. At its most basic level, portfolio management hinges on connections to executive teams with customers, talent, additional investors, or experts who can help guide strategy and expansion. Relationship intelligence makes it easier to know which of these connections are warm and fitting for portfolio companies based on a prescribed set of criteria.
The competitive differentiator: Relationship intelligence turns portco management into a proactive process. With centralized and integrated data, dealmakers can monitor growth metrics like hiring trends and use this to spot signs of a downturn before quarterly reporting time. With automated reminders based on a certain set of triggers, firms can check in on companies with varying frequency depending on their required level of support.
Workflow #5: Raising a fund—build an on-point shortlist
Why relationship intelligence matters for raising a fund: When fundraising, firms need to focus on investors most likely to respond. That means using engagement history, notes, and enriched data to shortlist the most promising investors by criteria such as thesis relevancy, previous investments, or history of interest. Relationship intelligence helps firms tailor outreach to each specific audience.
The competitive differentiator: Top VCs use relationship intelligence to go the extra mile by tracking investment status and engagement by organizations and individual investors throughout the raise. This provides firms with the insight to know where to best devote their time and resources as things change in the process.
Want to know how relationship intelligence can help your firm bust through industry benchmarks—even during an economic downturn? Read the full Relationship Intelligence at Every Venture Stage guide.