Managing the Deal Flow: A Deep Dive
#78 Angelinvesting.it - From idea to Series A - Weekly Newsletter
Dear reader,
I've always viewed Venture Capital as a people business. Finance and risk are secondary to the human relationships built through time and energy. Aware of the importance of relationships, over the last 10 years, I have tried to perfect a system for managing deal flow that helps me track and cultivate these relationships.
In the following paragraphs, I'll describe my method in great detail. I hope you find it useful. Let's start with the numbers.
Overview
Sourcing
Each year, I am exposed to 300-500 projects. Every week, I receive between 3 and 6 decks on average. These decks come from friends, cold contacts via LinkedIn, Twitter, and newsletter forms. Annually, this amounts to 150-200 projects I review inbound. This number more than doubles when considering:
project lists from various acceleration programs I follow
emails from angel clubs I participate in, and
projects I find online on Twitter and LinkedIn.
Screening
Each year, I meet 100-150 new founders (20-30% of the projects received). I keep up to twelve 45-minute slots open per week in my agenda for meetings. These slots are typically split evenly between meetings related to my portfolio companies and dealflow-related meetings.
The dealflow meetings consist of half being with founders I haven’t met before, originating from the previous sourcing process, and half being follow-up meetings with founders who impressed me during the first meeting (more on how I track impressive founders later).
Selection
Each year, I invest in an average of 5 projects (1-3% of the projects received). For 2024, I have set an investment budget between £100K and £300K. This is 4-6 tickets between £20K and £60K each. Last year, I invested approximately £105K (see link). So far in 2024, I have invested in Gotobeat, and I am now finalizing 2 more investments.
Details of How I Manage the 3 Phases:
Sourcing
All the projects I receive end up in ATTIO, the CRM I chose after 7 major iterations. I have tried Hubspot, Affinity, Copper, Streak, Folk, Monday, and Airtable.
The data input in ATTIO happens in 3 ways:
Founders who fill out the form (a Typeform) on my website or newsletter effectively do the data input for me. Typeform and ATTIO are relatively easily integrated.
Founders who contact me via cold contacting (typically LinkedIn) receive a message as shown below, inviting them to fill out the Typeform linked with ATTIO.
I manually input data for direct introductions, contacts, and various inbound lists.
Despite the high number of leads, this part of the process doesn't take much time. In addition to the Typeform -> ATTIO integration, two other tools are very useful in this phase. An app called Boards allows you to keep frequently used phrases pre-saved in the phone keyboard, and the LinkedIn extension of ATTIO works very well for adding people.
Screening
Of the 10 projects I review weekly, I write to 7 explaining that the investment opportunity isn't for me, and I write to 3 to accept a meeting. In terms of time, this initial screening takes about an hour and thirty minutes per week (an average of 10 minutes per project).
The projects I reject are either
(1) too early,
(2) too advanced (round A/B),
(3) not aligned with what I like to invest in, or
(4) exceptionally bad (30-35 per year).
For each of these cases, I have prepared email templates. For case 1 (too early), I always customize the template. I try to be very specific about which metrics are important to me and what values and growth rates I would like to see. For projects that are too early, I also set a reminder in the CRM for 3 and 6 months to check on their progress.
A comment I often hear is something along the lines of: "But how can it be too early, don't you do pre-seed?". Unfortunately, categorization exercises are often misleading, and "pre-seed" is certainly a controversial term. I've made pre-seed investments in startups with 30K MRR and startups with zero. For me, too early means: I don't dislike the idea, but I don't yet see signs of traction that make me want to risk my money on the initiative.
Selection
The 3 meetings with founders who passed the previous phase are one of the highlights of my week! The things I learn from those meetings, the humanity I encounter, and the energy I derive are priceless.
Sometimes (1 out of 10-15) I make mistakes, "being fooled by the deck" and accepting a meeting that didn't deserve my time. To keep track of this, at the end of each meeting, I give a score between 1 and 5 in a CRM column regarding the question: "Was this a good allocation of your time?".
For each meeting, I take a note saved in ATTIO within the project under evaluation. I have a template of information I want to ensure I gather from the meeting.
Finally, the video call is always recorded with Bubbles. Bubbles creates a link for each video call shared with all call participants. The link contains the recording with the meeting transcript. That link, along with my note, ends up in the CRM.
See you next week for more
Next week I will focus on everything related to selection. I hope you found this first deep dive into how I manage the deal flow useful.
Have a great weekend,
Simone
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Thanks Simone! Very interesting insights!