Global Venture Capital has grown 4x over the last decade, and not without a few ups and downs. 2022 was a huge year for deal activity, whereas the consensus is that in 2023, high-quality deals have been harder to source—and even harder to close. Yet, regardless of the economic cycle, every deal starts with a relationship.
In 2024, deal sourcing will look different. On the one hand, it’s a dealmaker’s market. Firms with capital to deploy have more time to conduct due diligence to source the highest quality leads, and more bargaining power to close them. At the same time, there are more funds than ever—up more than 1,500 in a decade, according to PitchBook—and competition is steep. Many of those funds are chasing the same type of ‘good’ deals: Solid fundamentals, a proven product-market fit, and revenue traction.
With the help of top dealmakers, many of whom spoke at Campfire 2023, we put together a new guide to help navigate the year ahead in deal sourcing. We’ve shared a few highlights below, including strategies that will help your firm source more effectively in the year ahead.
For the full picture of what deal sourcing in 2024 will look like, download our complete guide.
A data-driven approach is a key indicator of deal success
As we learned during Campfire 2023, data-driven dealmakers will define the winners of tomorrow. Yet today, only 1% of VC firms fit the criteria of being a data-driven investor. While this number is certainly low, the vast majority of firms want to increase efforts and resources in this area. Many firms are finding that their biggest hurdle is deciding whether to build their own internal tools or to outsource.
A good first step in becoming a data-driven investor is defining which signals matter to your thesis and why. Signals during early deal evaluation will vary, but can include full time employee (FTE) headcount, revenue growth rate, and funding stage among others. Historical data can be incredibly valuable as a predictor of future success. Amber Quinones, Head of Platform, BBG Ventures, told us that the firm uses nine years of data to better understand what makes a strong founder.
Relationship-first sourcing fuels deal flow
Relationships play a crucial role in every stage of the deal flow process. Warm introductions get a foot in the door, and close deals 25% faster. Dealmakers that can understand their team’s entire network at a glance are better able to source deals through existing relationships.
In our guide, we dive into how Lacey Behrens, Partner at 01 Advisors, uses Affinity to manage the firm’s network and source deals. She said, “[Having a strong] network is huge. It's one of our biggest competitive advantages. We actively engage our entire ecosystem at all times to build and nurture meaningful connections.”
Because most relationships are years in the making, it’s easy for important data to slip through the cracks if not properly documented. Relationship intelligence enables firms to with up-to-date insight into the strength of every relationship within a collective network. Dealmakers can glean understanding from the collected data and use it to uncover warm paths of introduction.
Optimizing technology supports seamless dealmaking
Leading dealmakers predict that adopting newer technologies such as AI is inevitable, and that tool adoption will be a huge accelerator and differentiator for the firms that are taking it seriously now.
For relationship building in particular, every touchpoint counts. Having data available in the tools dealmakers use every day helps them make educated decisions faster without disrupting their workflow. It also helps them reach out with better personalization and relevance.
Affinity users credit Affinity Pathfinder with dramatically reducing the effort it takes to source deals using relationship intelligence. In an industry where time is literally money—the best deals out there are also the most competitive and every second counts—features like one-click updates to deals saves valuable time that can be allocated elsewhere.
How your firm can drive success through relationship intelligence
To date, Affinity’s relationship intelligence platform has helped more than 3,000 investment firms across the world to find, manage, and close more deals. We empower firms in more than 70 countries to spend more time on the relationships and activities that have the biggest impact on their business.
To learn more about how companies can use Affinity’s relationship intelligence to source more deals in 2024, download the full deal sourcing guide.