The venture capital industry has experienced unprecedented growth in recent years. According to research by PwC and CB Insights, 2018 saw the highest volumes of venture capital funding since 2000, which marked the last year of the dot-com bubble. In 2018, total annual funding in the US ballooned by 30%, with nearly $100B invested across more than 5,000 deals.
With the number of unicorn companies growing at a break-neck pace and a slew of IPOs on the horizon, it’s an exciting time to be a venture capitalist But it’s also a challenging time. The ecosystem has become increasingly competitive, with the result that venture capitalists need to be more strategic and creative about tracking and managing deal flow. The key is to filter out the noise. In contrast to other industries, venture capitalists only invest in a small subset of the opportunities that come across their desk. According to Rosalie Seriese, an Investment Associate at AngelHubVentures, firms such as AngelHub invests in a mere 0.5% of all deals they see.
Fortunately, using Affinity, venture capitalists can become much more intelligent and strategic about tracking deals so as to maximize their chances for success.
1. Engage in proactive follow up
With so many deals and prospects in their pipeline, it can be easy for venture capitalists to drop the ball and forget to follow up with a key relationship. But, when the contact may be the next Uber or Facebook, this misstep can prove devastating.
The most successful venture capitalists leverage Affinity as a powerful virtual assistant that alerts them to proactively follow up with contacts and automatically updates contact details in real-time. Affinity sends smart reminders signaling that it's time to follow up with key relationships that are at-risk. It also prompts venture capitalists when they’ve sent or received an important email that has not received a response. Each time a new interaction takes place, details are automatically updated in Affinity, giving venture capitalists complete context in terms of the nature and status of the relationship.
For Caroline Graham, the Director of operations at 8VC, a leading early-stage VC firm based in San Francisco, Affinity’s reminder features are game-changing. Because 8VC manages thousands of new relationships every month, ensuring that all contacts receive a timely follow-up is challenging. Graham explains, "[With Affinity] I am able to quickly identify any relationship that might be due for some attention, relationships that might otherwise have been inadvertently dropped.”
2. Create intelligent and meaningful lists and reports
Data is great but only if you’re able to analyze it and capitalize on it. Using Affinity’s lists, venture capitalists are able to make sense of their pipeline and intelligently sort deals accordingly to the metrics that are most meaningful and relevant to them.
The list feature is especially impactful when it comes time for planning business trips. Affinity empowers venture capitalists to drill into their pipeline and immediately pinpoint which investors and advisors they know or should know in a particular region. This allows venture capitalists to make the most of business trips and capitalize on the face time that's so critical for forging meaningful and long-lasting relationships.
In addition to using Affinity lists to sort and contextualize its relationships, many venture capital teams leverage Affinity’s reports feature. Affinity can help streamline the process of reviewing, sourcing, and vetting inbound requests, as well as outbound sourcing efforts. Several investors use Affinity reports on a weekly basis to measure the velocity and output of their efforts.
3. Share network with portfolio companies
When startups vet potential investors, they are not singularly focused on securing the biggest check. According to research by Wharton management professor David Hsu, less than half of startups accept the best financial offer when raising capital. This is because venture capitalists offer a lot more value than money. By and large, entrepreneurs are more focused on what value-added resources they bring to the table.
The most effective venture capitalists leverage Affinity to share their most valuable resource—their network—with their portfolio companies. For Mar Hershenson, co-founder and Managing Partner at Pejman Mar Ventures, a seed-stage investment firm based in Palo Alto, this functionality has enabled the team to gain a key competitive advantage in the eyes of portfolio companies. After Hershenson and her investment team shared their collective real-time Affinity networks with the 11 B2B startups in the Pear Summer 2017 cohort, Affinity instantly revealed more than 11,000 introduction paths to new prospects in sales, BD, and fundraising. Access to these key potential partners can make a big difference in opening up new opportunities for portfolio companies.
The red-hot venture capital landscape is mandating that venture capitalists become more strategic about tracking deals in order to stay ahead of competitors. It's no longer possible or wise for venture capitalists to track deals manually. They need an intelligent platform powered by cutting-edge algorithms and technologies to support them. Affinity can come to the rescue in terms of helping venture capitalists intelligently track deals and maximize their potential for success.