Tips On Later Stage VC / Growth Equity Sourcing?

Analyst 2 in IB - Cov

Anonymous

Following

Authored by: Certified Private Equity Professional - 1st Year AssociateCertified Private Equity Pro

brees

Baboon

Most Helpful

I work for a Family Office HQed in Singapore, but invest worldwide. Our typical check size can be $25K - $5M depending on the round / geography etc. I know it doesn't sound like a lot - we also don't invest in later stage rounds in SV. Here's how we sourced our most recent round(s):

We're an LP in two early stage funds (one geo focused, other sector focused). We aren't an anchor LP but have a side letter getting us allocation that anytime a portco in these underlying funds has a round, we can pick up the allocation rights of the fund. It's a nice synergy since these funds (say Fund A and Fund B) don't have the capacity to fund after Series B/C, so their allocation rights based on their initial holdings (10-15%) they can give to us (or the other anchor LPs). Usually by this point in the cycle, if these companies are doing well we'll take a look at them. Other than that - if we can't get allocation rights, Fund A and B will make sure we meet with management.
Our own portfolio / recommendations from our portcos and/or coinvestors. The sectors / geographies we invest in (EU / SEA / India mostly) aren't as capital rich as SV. We partner with other Family Offices / PE Funds / Institutionals / SWF on a frequent basis and are on the BoD. There's usually an informal chat / catch up at some point in investing life cycle of a company whereby another BoD will mention to us "hey X company is raising / doing a bridge round <ETC>". "Usually" comes a from a credible source so if there's a couple of $Xmm left on the table we'll entertain it / move forward into DD.
Somewhat similar to above - but within our own internal networks. Some deals have come from our lawyers, bankers, friends in the industry etc. This can sometimes be somewhat unreliable since our mandate is broad due to us being an FO, but we like to stick to similar principles as other investors. I try and go to networking events to meet early stage founders (helps my friend is a well-known founder who can bypass a lot of BS and put in a good word for me!) and track how they are doing from Seed - > later stage rounds with intermittent beers / emails over the years.

May not be applicable to your area so apologies in advance. Send me a PM if you have any more questions!

Authored by: Certified Private Equity Professional - 2nd Year AnalystCertified Private Equity Pro

NothingVentured

Orangutan

I work for a VC investing 5-20m at Series A-B, so this might skew slightly towards early stage.

Sourcing comes from 2 angles - I) Inbound, and II) outbound.

Outbound

1) Thematic: we are a thematic investor, so we will form a view on a vertical and then work out if any companies are investable/ hit our criteria. I use LinkedIn, Twitter, and email for cold outbound. Luckily we’re of a high enough profile that people respond. For very high value prospects, I’d arrange a warm intro or ‘meet them by chance’ at a conference.

2) Database Screening: using data sources like PitchBook, Crunchbase, and Tracxn to identify companies that hit our criteria. I then generally reach out cold.

3) Opportunistic at events: bit hit or miss.

Inbound 1) Advisers: I maintain some advisor relationships as later stage companies sometimes use bankers. Tbh - quality of deal flow is generally pretty poor. Don’t think we’ve ever actually close a deal with a company from this channel.

2) Founder Inbound: all VCs receive a non-stop stream of poor quality inbound - but to get high quality inbound you need to go out of your way to build your reputation (online and offline). If you become known as a specialist in a given area, people will come to you.

3) VCs: I network with a bunch of VCs and we share deal flow. This is a highly effective method and one of the best ways to invest your time. This gives you potential access to their portfolios when they’re raising and to pre-vetted flow. I see a bunch of companies which are great - but too early, too late, or otherwise outside my mandate: I go out of my way to share that flow with other investors (it’s good for everyone).

4) Portfolio & Broader Network: often reasonable quality - it pays to communicate your mandate and actually be helpful to people wherever possible. Goodwill goes a long way when sourcing flow.

Authored by: Certified Venture Capital Professional - NACertified Venture Capital Pro

perpetual intern

Human

Can you expand on #3 of Inbound please? If you're willing to say more would be appreciated. Thanks.

Authored by: Certified Investment Banking Professional - 1st Year AnalystCertified Investment Banking Pro

NothingVentured

Orangutan

Minima laborum iure et necessitatibus. Porro distinctio laboriosam omnis illum. Voluptatem nihil odio dolor quis error cupiditate et hic. Architecto ea iusto voluptatum quia.

Voluptatem est soluta quae sunt temporibus soluta quis reprehenderit. Explicabo aut veritatis quia illo et et magnam.

Est voluptatem quidem quae asperiores quo in voluptatum. In aliquid enim omnis exercitationem iusto eligendi deserunt. Consequatur reprehenderit dolores assumenda quod sed itaque est. Et sit sunt ab quibusdam mollitia voluptatem fugiat.