Seed / Series A deal sourcing

For the VCs doing seed and series A, how are you looking for companies?

I do series A-C and we almost exclusively use crunchbase/pitchbook, go through the YC cohorts and then maybe look at G2 product pages, but that’s about it.

I’m assuming that seed investors are mostly relying on the network of the GP, but are there any other ways to source these early stage startups?

 

We don’t do early stage investing (see: series A-C) and basically every company that raises seed or series A from a credible VC will be in CB/PB. Most of our investing is series B+ and we have well connected higher ups to help us get into rounds.

How are you defining “proprietary sourcing”? What I’m curious about is how the seed investors writing the first check find founders beyond inbound from their network. Is there anything else they do?

Returns are “ehh” FWIW. Definitely not dogshit but not top quartile right now.

 
:

we almost exclusively use crunchbase/pitchbook, go through the YC cohorts

Be honest, your fund's returns are dogshit right? The biggest source of alpha in early stage investing is proprietary sourcing, there's no way sticking to the same channels that I (an IB analyst) use gives you an edge.

highly disagree - you are clearly not a VC . No such thing as proprietary deal flow lol

Best deal flow comes from late-stage founders. Dial in with them, and they will help unsurface exciting early-stage founders.

 

Based on the most helpful WSO content, here are some strategies for sourcing seed and Series A stage companies:

  1. Leverage Awards and Recognitions:

    • Keep an eye out for startups that have won awards, as they often highlight these on the first slide of their pitch decks. Research these awards to discover other winners who might be potential investment opportunities.
  2. Track Startup Funding:

    • Subscribe to newsletters like Term Sheet and Strictly VC to stay informed about companies that secure funding. Since most financing rounds are designed to last 1-2 years, set calendar reminders to reach out to these startups when they might be running low on funds and ready for the next round.
  3. Utilize the SEC's Edgar Database:

    • Look for Form D filings from a year ago to identify startups that have raised capital, as this can be an indicator of potential future funding needs.
  4. Networking Through Vendors:

    • Engage with attorneys, accountants, and other service providers who work with VC-backed startups. They can provide introductions to their other startup clients and to other VCs they work with.
  5. Accelerators and Incubators:

    • Offer mentorship and volunteer office hours to build relationships with both the management and the cohorts of accelerators and incubators. This can give you inside knowledge on promising startups and help establish rapport before demo days.
  6. Portfolio Companies:

    • Ask existing portfolio companies for introductions to their VCs and board members. Also, inquire if they know of any startups that fit your investment strategy.
  7. Co-Investor Relationships:

    • Build relationships with co-investors in your current deals and ask for introductions to startups they are considering for investment.
  8. Industry-Specific Forums and Discussions:

    • Participate in forums like Wall Street Oasis, where you can share insights and learn from peers about potential investment opportunities.

Remember, while using tools like Crunchbase and Pitchbook is common, it's also important to actively engage with the startup ecosystem through networking, industry events, and maintaining a strong presence in the communities where startups thrive. Seed investors often rely heavily on their networks, but these additional methods can complement and expand their deal sourcing capabilities.

Sources: Your best sourcing tips, Want to build a startup & raise some money? Part II, VC startup idea - PE or VC interest? Are these numbers viable?, Want to build a startup & raise some money? Part I, VC Sourcing (Healthcare)

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

Depending on if you're sector focused or not, tap in with founders. They usually hear about other founders and upcoming startups, and the best part is that it's "proprietary". I would also encourage just going to ground at a lot of conferences, online Twitter (sorry, X) communities, and innovation folks at corporate firms that would partner with these earlier startups.

Just using pitchbook and other public databases is yikes, no offense. Not a lot of alpha there. Plus if founders aren't directly reaching out to your GPs about rounds, chances are you're not getting into very competitive deals.

 

The best deals will always come through your network, most often referrals from other VCs and a handful of credible KOLs. Many VCs will have regular calls with other VCs that they like to work together with, and share dealflow. The most successful VCs know their markets and key executives, and these are often who will become founders of new ventures (in B2B, consumer is a bit different). The best founders also tend to be serial entrepreneurs, and they typically have established investor relationships that percolate through your network. I've also seen some creative sleuthing using LinkedIn data, hunting within incubators, crashing hackathons and engineer meetups, and making friends with IP-transfer offices (in the case of deep tech).

Hootie
 

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