How can you stand out when sourcing deals as a Venture Capital investor?

Just as founders are expected to define how their venture is differentiated, VCs too have to be able to articulate and illustrate their investment thesis as a sound, consistent, repeatable investment process, what their key differentiation is and their ability to strategically add value beyond writing the check.

If you want to stand out from other investors, you need to be present in your local tech ecosystem. It is important to have a good relationship with the post secondary institutions in your target markets so that you can stay on top of new research and emerging technologies. There is also value in participating in panels and events hosted by accelerator programs or other mentorship organizations for startups. Your goal should be to make sure that the smartest, most capable innovators in your target market will know who you are, and think of you as the first person they want to call when they eventually decide to raise capital.

Specialize: Focus on specific sectors or technologies to become an expert in your niche. Network Extensively: Build connections with entrepreneurs, industry players, and academic institutions. Offer Value Beyond Capital: Provide mentorship, strategic advice, and networking opportunities. Utilize Technology: Leverage AI and data analytics for early trend identification and startup discovery. Establish Online Presence: Be active online, sharing insights and engaging with your industry community. Prioritize Relationships: Understand founders deeply and build trust. Practice Transparency: Maintain a reputation for fair and transparent dealings. Stay Informed: Keep abreast of market trends and adapt to the evolving startup landscape.

It's so often the case when I work with fund managers to improve their deal flow process that they worry that being transparent about their process will either 1) scare founders off or 2) give up their secret sauce. My response: Would you rather continue getting feedback that you're slow to respond and your process is frustrating? Also, most VCs have the same sourcing and evaluation process but don't document and adhere to it. That's what can set you apart from the rest. A proven, documented, fully implemented sourcing and due diligence process can help double your deal flow. I've seen it in the more than 20 funds I've worked with in the last year. Founders appreciate honesty, knowing what to expect, and a quick no.

The entire purpose of being a venture capitalist to is to help startups grow. Financial support plays a part to this, but there’s more we can do easily. We always try to help where we can first, this can be as simple as forwarding their deck to another investor you’ve recently spoken to who may be interested. It can also be through connecting them to your portfolio companies. There could be media opportunities they could be good for that you come across. Giving honest feedback may be difficult but will help the startup on its journey. Ask if they want to hear it!

Be involved in startup ecosystems in many ways, for example as a founder, investor, consultant or advisor. This exposure can help change your perspective and help you add value. Stay up to date on trends and news as a lot can happen to affect demand for industry verticals or technology.

My advise to investors / VCs If you can flip it; as in sell it to someone else. If you can add value. As in sales tech distribution etc If you can help collaborate with someone else to as 2+2>4 If you can open new geographies Only then invest. Else it’s a waste of everyone’s time. Investors need to bring value to the table apart from money. They need to realise that the cost of having someone on board who does not understand the business is high for the startup.

Investment decisions for venture capital allocations are a relative to various factors like specific portfolio’s investment thesis, portfolio positioning at a specific point in time vis-à-vis where the company is in its journey to achieve its milestones. Most of these factors evolve over time, also founder & investors can add value to each other over the long term beyond just by way of direct investments in the raise being discussed at a specific point in time, hence maintaining long term relationships within the ecosystem is a key contributor for better outcomes for both founder & VCs.

I actually disagree with the flow of this. I don't agree that your thesis should rive your network building activities. I think it's quite the opposite. Your thesis is the result of your network and expertise. As in, something you've built for years.