Associate Sourcing Model in Growth Equity: How Valuable Is it?
So a lot of growth equity shops (Insight, GA, TCV, Summit, etc.) have a sourcing model for their junior investment team and I was just wondering how much of a value add that really is (for both the employee and the fund). I understand that the job is likely not like a PWM intern gig where you just sit around and compile massive lists of contact info and just cold call/cold email but are associates really sourcing blockbuster raises that nearly every shop in the Valley knows about and is gunning for? Or is it more a shotgun strategy for the associates hoping one of their investments is a 10 bagger and the GPs are the ones bringing in the blue chip deals?
Curious if anyone has had firsthand experience - just wondering bc the model has been around for quite a while and these firms claim to have access to prop deal flow
I’m at a firm similar to the ones you listed and it’s 100% associate sourcing. Even if someone who has a personal relationship with a partner reaches out they still pass things on to me or a colleague.
Frankly bottoms-up sourcing is the only way to get a high volume of deal flow in a scalable way. Your GPs are a lot more expensive and the conversion rate on any one prospect is so low that it’s a waste of time for them to invest much effort in initial vetting, or really any pre-term sheet DD.
Accordingly, most founders are used to the model and will talk to junior guys (we even have had interns source deals that got done). You probably pull in a GP once you’ve done an initial layer of vetting until you can be trusted to win a deal yourself, but not uncommon for Senior Associates to take things all the way to LOI solo if they’re good.
So then are year-end performance reviews based off of how successful you were in bringing in business? I'm struggling to imagine switching from IB into a sourcing-heavy GE role where "finance"/deal execution isn't even part of my day-to-day.
Kind of. Theres so much time / randomness to getting a deal done that you can’t really compensate based on closed deals — more leading indicators like meeting volume, quantity / quality of pipeline companies, LOIs issued, etc
I still spend 30-40% of my time on more classic finance and DD stuff but you’ll definitely find social types in this industry who just want to be on the phone as much as possible and don’t GAF about Excel. Those can actually be the guys who end up doing the best.
Could you please say more about how one would track success in sourcing efforts?
Do you not modeling at all in GE?
I think I did? All of the KPIs you quoted are discrete items, you set targets for all of them and measure performance relative to peers, over time, etc. Can you elaborate on your question?
Ah hey sorry, I mean, how you would track your own success (e.g., tracking emails, tracking conversion to meetings from emails, somehow tracking value add, determining cadence of check in, tracking how many term sheets you end up extended, tracking why you lose when you lose, etc.)
Thanks a bunch.
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