4 tips for optimizing your deal flow for high-quality deals

table of contents

Rosalie Seriese, an Investment Associate at AngelHub Ventures, describes a common reality for investors—firms such as AngelHub invest in only about 0.5% of all deals they see. Of the five deals that the firm funded in a recent funding year, four came via a trusted referral. The fifth investment was also relationship-driven—it came by way of an endorsement from a trusted source shortly after the company contacted AngelHub. 

With venture firms investing in so few companies relative to their total volume of deals, improving sourcing and managing an efficient evaluation and diligence process are key differentiators of successful firms. Here is a breakdown of four tips for venture capitalists to optimize their deal flow management for their highest quality deals.

Centralize your inbound leads

Strong networking in venture capital often leads to a surge of introductions from companies seeking investment. Even the top firms struggle to filter through the noise to ensure that their deal flow processes are running smoothly and targeting the best opportunities. It’s important to ensure that valuable information is not lost, and that data is disseminated to the right people.  

The following tips can help ensure that you keep track of the right data and distribute it to the right people.

  1. Assign a team or individual to manage inbound leads
  2. Centralize opportunities automatically
  3. Create an easily shareable view for distributing 
  4. Standardize your contact management, including how your team manages notes and attachments 

With only so many hours in a day, it’s critical that as much of your deal flow process exists in one place. That easily allows you to sift through a high volume of conversations and focus on the opportunities that matter.

Manage risk

Venture capital is inherently risky. Setting expectations for and adjusting your firm’s risk levels as leads come in, can help establish a clear concept of what you see a quality deal. The balance of quick return with high potential is critical to consider when managing new investments for a portfolio. 

Ricardo Taveras, a serial entrepreneur and an angel investor based in New York City, has years of experience both as a founder and investor. He sums up the importance of enterprise risk management for VC firms by stating that every important and influential decision made by a venture firm aims to manage risk exposure so that it is within the desired risk appetite of the firm and its portfolio companies. 

You should base your strategic decision about whether to increase or decrease risk exposure by following Taveras’ four steps to risk management for each investment opportunity:

  1. Risk Identification: Establish the top 30 risks facing each portfolio company
  2. Risk Quantification: Establish the overall enterprise risk of the VC portfolio
  3. Risk Decision: Make informed decisions on responses to substantial risks
  4. Risk Messaging: Inform the limited partners of the VC fund

Conduct thorough due diligence

Your due diligence process may come much later in the funnel than sourcing new leads, but it’s still better to pass on a deal post-diligence than allow a flop to sign a term sheet. Conducting due diligence on early-stage companies can be particularly challenging as these companies typically have less tangible evidence to demonstrate their worth. 

You can follow a few simple guidelines to ensure you are investing in reputable businesses positioned to thrive. UpCounsel, an online marketplace for legal services, has created a comprehensive due diligence checklist, that includes aspects such as: 

  1. Conduct a holistic analysis, of their team—from the individual contributors to product to legal
  2. Speak with existing and potential customers to assess traction to the offering
  3. Recruit experts to assess the product offering
  4. Evaluate the trustworthiness of the co-founders and team, and research past employees

You should also keep an eye out for astute portfolio company founders who conduct reverse due diligence on you. As Asya Bradley, COO First Boulevard has urged founders: “You should absolutely [conuduct due dilligence]. Do your due diligence on all your capital partners!”

Set the right KPIs

Measuring the quality of your deal flow is critical, and setting clear KPIs for your team provides a tangible way to measure that quality. Lukas Vogt, an investment team member at Capnamic, says there are three primary metrics for measuring quality deal flow.

Deal volume and quality

Both the quantity and quality of deals in your pipeline have to be clearly measured. VCs want "to know how many startups knock on the door and how well these startups fit to the fund with regards to: business case, industry, team, phase, funding requirement, etc.” 

This outlines exactly which of your team's deals fit your investment thesis and which are most successful.

Deal source

Another facet of your team's success lies in the source of your deals. Vogt adds: "where [did] the startup came from?” Because investing is [a] people business, a VC wants to have a large number of deals sourced through its own network and events.” 

Tracking deal source allows you to review which of these sources are the most likely to lead to new deals, which geographic locations are driving the most opportunities, or who on your team has the strongest network for your industry.


Supporting the industries and communities you invest in can offer new introductions and engagement for future opportunities. Adding support as a KPI stems from Vogt's idea that "the VC’s duty to give feedback and knowledge...to startups reaching out — even if they won’t get money. This service-oriented dimension could be a net promoter score or a qualitative analysis based on feedback from startups.” 

Establishing a clear brand presence within the industries you serve only helps expand your network and may open the door for new, interesting opportunities in the future. While different investors opt to measure different KPIs, the key is that you adopt a holistic set of metrics and be diligent about measuring them consistently over time. 

Creating a consistent flow of high-quality deals is a daunting prospect. High quality, high-value opportunities are the key driver of success in venture capital, and learning how to prioritize and build your deal flow pipeline to target high-quality deals creates a more targeted approach to sourcing and deal management. 


posted in
share this

Interested in learning more?

Reach out to us and get a personalized demo

Talk to Sales