Looking to break into growth equity & understand sourcing is a main part of the role, especially at firms like Summit, PSG, TCV, Spectrum, etc.
Would anyone be able to share how someone can go about sourcing an investment? What resources do they use? What metrics / ratios do they focus on & how do they find them? What size & stage investments do they make (understand some firms do late-stage venture & some do more growth buy-out stuff)? Is a firm that has raised Series D funding something a growth firm would look at or are they only focused on companies that have no prior investment? etc.
Understand a large portion of the role is calls & emails to founders & businesses as well as industry events but curious as to what resources people use to first find these companies (besides talking to bankers) & what criteria they look for.
Any insight into this process & what firms look for would be much appreciated.
Thanks!
https://www.wallstreetoasis.com/forums/pege-deal-sourcing
Edit: to answer your other questions...
The metrics/ratios will depend heavily on the firm and/or their strategy. Some are looking for very high growth, some are looking for companies closer to B/E or above. Same for size and stage. In a nut shell, there's no broad industry cookie cutter approach.
If it's tech then it's your usual SaaS metircs like retention, ARR growth, revenue mix, concentration. They would also look heavily at the sales org and pipeline to assess the likelihood a company will hit it's projections. Softer things like market opportunity, competitive landscape, differentiators are all important too.
Thanks for this.
How does one find all this information on a private company? Is it just through conversations with the CEO?
Also, would a growth fund invest in a company that already has received some sort of funding or only bootstrapped companies?
The information is rarely (actually I'd be shocked) if it was floating around somewhere. You just ask. Most tech CEOs know that these metrics are table stakes to advancing any conversation. I've had calls where they literally spit out all those metrics within the first 10 minutes as to not waste either sides time and I've had others where you just get broad ranges like "between $5mm and $10mm of ARR growing 50% y/y".
Sure, fast growing bootstrapped businesses are always more interesting as you know it's capital efficient. Again, it'll depend on the firm as some stick to the "first institutional capial in" philosophy and other's don't care. Just crush the previous round of investors with a new tranche of participating preferred shares ;)
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