How often do Growth Equity firms find deals through bankers vs. proprietary sourcing?
Wondering how often banking relationships are relied upon by GE firms to to find deals, as I realize that most GE associate/entry-level roles are extremely sourcing heavy. Additionally, do GE analysts and associates develop their own banking relationships or do the firm's more senior level members primarily handle this?
Finally, is the there any value to a growth-stage company to hire a banker in a fundraising scenario? What comes to my very inexperienced mind is that bankers can potentially shop the company around to get them the best terms possible.
Thanks in advance to any responders.
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Curious about this too
I've heard it was about 75/25 a few years ago but now approaching half and half at a lot of classic sourcing firms, but a lot of the times when they do go through bankers they've had a relationship with the management team first that gives them competitive dynamics that allow them to win (e.g., last look). Mind you these stats are for classic "growth" companies or "growth buyouts", but for true later venture firms it's really not a landscape dominated by bankers.
If you mean growth stage companies hiring a banker as in classic growth buyout, then yes sure. Venture? Not really commonplace but there are some late venture focused buyers such as Needham does a lot of late venture. Those guys circle top notch venture firms like hawks waiting for business once good portcos separate from the rest of the junk.
Cool, this is pretty helpful. Thank you.
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Interned at a big VC thats trying to build up their growth platform-
My firm expressly avoided banked deals. Any time bankers were involved, they assumed the process would be more competitive and valuation would be way too high, whereas if they sourced a company that wasn’t necessarily actively looking to raise then the terms of the deal are much better. Note that my firm wasn’t exactly known as a top GE firm (more of an early stage firm with a growing growth operation), so I think they knew they’d often lose going head to head with a TA/Accel/etc.
The exception to this was existing relationships- senior bankers would call the partner and they’d work out a deal quickly. Not a standard banked process that went out to 20+ firms.
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