What is the purpose of deal newsletters?
Letters such as Axios Pro Rata - why do people read this? I get it gives trends in VC/PE deals, but why does it matter? Shouldn’t people be forming their own ideas about what to invest in rather than jumping on the trend?
I would understand if it was for an everyday joe, but these types of newsletters are always said to be read by VCs.
Based on the most helpful WSO content, deal newsletters like Axios Pro Rata are valuable for several reasons:
Staying Informed: They provide up-to-date information on the latest deals, trends, and movements in the VC/PE landscape. This helps professionals stay current with market activities and understand the broader industry context.
Insightful Perspectives: These newsletters often include expert analysis and commentary, which can offer new perspectives and insights that might not be immediately apparent. This can be particularly useful for forming a well-rounded view of the market.
Networking and Conversations: Being knowledgeable about recent deals and trends can help professionals stand out in conversations and interviews. It shows that they are well-informed and engaged with the industry, which can be a significant advantage.
Identifying Opportunities: While forming one's own investment ideas is crucial, understanding the trends and movements in the market can help identify potential opportunities and risks. It provides a foundation upon which to build more informed and strategic investment decisions.
Benchmarking: For VCs and other investment professionals, knowing what others in the industry are doing can serve as a benchmark. It helps them understand where they stand relative to their peers and can inform their strategies and decisions.
In summary, deal newsletters are not just about following trends but about gaining a comprehensive understanding of the market, which is essential for making informed and strategic investment decisions.
Sources: How to Read Financial News, Keeping Up with the Zuckerbergs (Learning About/Staying Up-to-Date on the Tech Industry), Keeping Up with the Zuckerbergs (Learning About/Staying Up-to-Date on the Tech Industry), Your best sourcing tips, Dead Cat Bounce | The Daily Peel | 10/17/22
Investing is about consuming lots of information and then identifying patterns. These newsletters are just more data points. I doubt anyone is making core investment theses off of newsletters but maybe they already have an idea and this helps them gather more conviction based on broader trends.
When I was in VC I'd read them to understand underlying funding trends, appetite for future raises for our portcos, and updating marks for existing investments where we didn't have information rights on new rounds. Also you'll often know about many deals before they're announced but it's helpful to know if you missed any and figure out what you can do to ensure better coverage as a team.
I probably read 3-6 deal newsletters every morning and have custom deal alerts on Pitchbook/Crunchbase.
In VC, especially in the series B and beyond stage, it’s important to look for trends and groups of similar companies getting funded. If Sequoia, Benchmark and a16z all fund similar companies at the same time, that’s a good signal that a space is hot.
It’s good to know what spaces are hot and understand “the real narrative” as opposed to whatever a journalist or other VC will say. That doesn’t mean that you should blindly invest because the space is hot (VR a decade ago, crypto in 2021, etc.). The opposite is also very true - Outliers with a strong vision and management team can win in an overlooked market (SpaceX)
Love this response, makes sense.
next question: if lots of late stage/ growth funds use this for ideas, and everyone is looking to get into the same area, how does everyone get satisfied?
i have a feeling (please correct me) a) less growth funds so less mouths to feed b) other factors (i.e. specific value adds to niches within ‘hot’ spaces, brand etc) c) outliers as you mentioned
They are used as a sourcing funnel for growth and multistage firms. That's their primary use case.
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