Why Dealflow Is Like Sex, Quality Not Quantity

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I meet with over 40 VCs a week and many of them proclaim their deal flow to be a plenty. Positively overflowing with fantastic and high quality leads from great referrers in the network. 2 takeaways from this. 

1.) Don't Believe The BS

In American Pie, we are told if a guy is asked how many girls he has been with take that number and divide by 3. The same can be attributed to the amount of people that say they are killing and those who really are. Take it with a pinch of salt. The biggest advice I always have to founders is focus on yourself, you can always feel better or worse about yourself when making comparisons. So focus on yourself, your product and the KPIs that you have set for yourself. Row your own boat, don't look for the competition.

2.) Quantity Means Nothing

Despite many suggesting their pipeline is just rammed with deals. That really means absolutely nothing. It is the same in the world of SaaS with marketing bringing in a ton of poor quality leads, it is irrelevant if they do not progress your company either in revenue or investing. One way to determine the truth from the BS is to look at their investing cadence. If their cadence is fast and frequent, then it is highly likely that they do have a good flow of quality deals and they are acting on them. However, if it is stagnant or slow, this is a leading indicator that despite the hype it is BS. At the end of the day, if the deal is quality enough, the investor will do it. 

Ultimately, for investors if you would like to increase the quality of your deal flow, I would suggest the same advice we provide to founders entering the fundraising process. Start a Google Sheets Doc and compile a list of 10 names in your ecosystem who have the best deal flow that would benefit you and your investing style. Then simply make moves to be as helpful and synergistic with them as possible. Prove your value to them and they will provide their deal flow to you. Adam Grant's Give & Take is a genuine replication of this industry. 

P.S. If you have not read it yet it really is a must read and can be found here

 

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