VC deal flow management strategies and best practices

To succeed in today’s fast-paced marketplace, venture capital firms must manage new business opportunities swiftly. To keep pace as a virtual VC, leading VCs are turning away from Excel spreadsheets and the previous generation of CRM platforms for their deal flow management.

Deal flow management for VCs requires sound strategy and tools that work with sophisticated and complex deal processes—systems purpose-built for the non-linear way that VCs make deals. Without these things, VC deal teams lose track of valuable data and can waste time on poor-fit opportunities while the good opportunities slip through the cracks.

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In this ever-changing venture capital ecosystem, few things are more impactful to a firm’s bottom line than quality deal flow. Top VC firms are getting (and staying) ahead of the competition by efficiently managing their incoming opportunities and ensuring the best deals don’t pass them by. They are vigilant about increasing deal flow and keep an eye out for top deals that may be heading their way with the help of a purpose-built VC tech stack.

In this post, we clarify what effective deal flow management is, outline some key strategies for how to organize your deal flow, and how you can most effectively use technology to streamline your venture capital deal flow management processes.

What is VC deal flow and why does it matter?

Venture capital deal flow is the velocity and pace (flow) of incoming investment opportunities (deals) for a VC firm. Like in private equity and commercial real estate, strong deal flow is a determining factor of a successful VC firm. 

Deal sourcing conversion rates—opportunities that go from referral to initial meeting to closed deal—are incredibly low (often less than 1%) which means volume is the name of the game. Successful VCs connect with hundreds, or sometimes thousands of potential portfolio companies, founders, stakeholders, and intermediaries each year.

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But volume isn’t the only factor that matters. The quality of the deals in the pipeline is also an indicator of the health of your firm. Low-quality deals in your pipeline waste your firm’s time and resources on due diligence for poor opportunities.

Inbound deals come from many places, including word-of-mouth in startup communities, third-party data sources, angel investors, and activity in other investment firms, but they primarily come through your VC firm’s existing network relationships. How your firm manages those relationships—and all the communication and activities that happen as those relationships are established, grown, and maintained—directly impacts your venture capital deal flow management, and your firm’s ability to withstand changes in the market.

How top VC firms manage deal flow with a relationship intelligence CRM

Let’s look at two specific ways top firms are using deal flow management software like Affinity, to manage and organize deal flow:

Centralize inbound deal flow

If your firm has a strong track record, and your team is effectively managing and using their network, chances are they're getting bombarded with introductions and one-pagers on companies that are seeking investors. With so many emails, it can be tough to sift through the noise and ensure that valuable information is not lost. 

Connecting your email inbox and contact information with a deal flow management tool centralizes all of the communication related to your most important deals automatically so you never miss out on valuable pieces of information. 

You can also set up a distribution email (e.g., deals@yourvcfirm.com) so anyone on your team who receives an inbound opportunity can forward it to that address and consolidate your inbound records to a single account. This way, not only does everyone on the team get a quick look at the opportunity, but also the person handling deals has real-time access to all inbound information. 

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Improve collaborative work

If centralizing data is the first step in optimizing your deal process, the next is making sure that when one person receives important information, it can be accessed by anyone connected to the deal. Relationship intelligence platforms eliminate data silos so everyone on your team can stay up to date while retaining granular privacy controls so others can remain on a need-to-know basis.

The same data silos that thwart nurturing connections are also walls between your team and new deal opportunities. Efficient knowledge-sharing helps your team move in harmony so they can do complementary—rather than overlapping—work. Utilizing every avenue in your professional network to drive toward your next deal requires that your team understands who owns what.

With a relationship intelligence platform built for deal flow management you can more easily collaborate on:

• Sourcing introductions within your CRM without accidentally overreaching and connecting with a prospect someone else is already working with.
• Learning who on your team can provide a warm introduction to a prospect in their network. 
• Ensuring that deals are easily visible and shareable throughout the deal management process.

Why leading VCs are using Affinity for deal flow management

Affinity Relationship Intelligence platform is a CRM purpose-built for venture capital firms. Unlike standard CRM software solutions, Affinity’s core features support deal flow and relationship management automation, including automated contact profile creation, contact management, and activity tracking. 

Affinity works with your deal team’s existing email software and calendars (including Gmail and Microsoft Outlook), freeing them from hundreds of hours of manual data entry per year. The time they save with Affinity’s automation features time can then be spent on sourcing deals, building and nurturing relationships, and fundraising. The platform also offers extensive custom integrations that include file management tools like Dropbox, email marketing tools like Mailchimp, and even other CRM platforms like HubSpot.

Affinity’s pipeline management features support the sophisticated, long-term dealmaking that constitute venture capital deals. This is a competitive advantage in an industry that requires speed to action over long time periods to win the best deals.

What truly makes Affinity a game-changer for VC firms, however, is relationship intelligence—insights into your team member’s collective network, business connections, and client interactions that help you find, manage, and close more deals and make smarter investment decisions. Affinity’s proprietary algorithms assess and analyze every relationship across your firm to help you find the right connection point, unify your team’s collective network, and find the best path to an introduction for new opportunities.

Built-in business intelligence also makes it easier than ever to update limited partners (LPs) with automatically generated reporting and analytics dashboards. Share your most important business metrics and KPIs with LPs, report on deal flow pipeline status, and keep your firm’s brand top of mind as one of their leading funds.

Talk to our team today to learn more about how a relationship intelligence CRM can help your firm optimize your deal flow management workflows.

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