Deal sourcing strategies are at the foundation of any successful private equity firm. Historically, firms have focused on building the right relationships. Now, with the rise of technology tools, you can build systems to scale your efforts. Gone are the days of waiting for manual follow-up research to happen and tracking stale data in your CRM - we're ushering in a targeted and streamlined approach to deal sourcing with our Navatar partnership.
During the Watch List 2.0 Webinar, Nicholas Donato of Navatar addressed the changing market and how best to revamp your deal sourcing methods. Eric Starr of CapX Partners and Andrew Albert of TVC Capital addressed how their sourcing programs have evolved and what data they analyze to always stay ahead of the competition.
Dry Powder & The Competitive Playing Field
The biggest challenge facing deal sourcing professionals is the unprecedented competition in today's market. With a steady growth in the number of private equity firms over the last decade, around 8,000 active firms are now competing for the same deals. Donato highlighted this simple fact saying, "the number of target companies for buyers to pursue is not growing in tandem with the surging capital commitments out there and the number of buyers on the field". To make this imbalance even worse, there's a record high amount of dry powder waiting to be used.
In this new reality, it's time to adapt. With so many other competitive players, you need to manage your network properly in order to leverage outreach efforts. Evolving your watchlist will require high-volume data analysis to stay knowledgeable about market trends and understand how to establish credibility in deal sourcing conversations. Most importantly, these efforts need to be built at scale and provide real-time insights.
Watch List 2.0
Increased sophistication in deal origination strategies now means including data tools to automate workflows and scale sourcing processes. Relying on a company data provider (such as DataFox) and integrating with your CRM is the powerful edge you need to beat out the competition.
"Once the two systems are connected, there are all these different ways in which you can utilize the technology to essentially super charge your sourcing efforts." - Ketan Khandkar, Co-founder and COO of Navatar
With this combined approach you can easily run a market analysis and leverage company data to track accounts, prioritize accounts, and personalize your messaging. Using your investment criteria, you can develop a highly-targeted sourcing strategy that focuses on high-value deals and pulls intelligence on similarly valuable and relevant accounts.
The scalability of using a company data provider comes from eliminating manual research and instead automating data collection, focusing on signal data and the insights derived by continuous company analysis. Differentiation lies in the details.
"DataFox does a number of neat things. First, it's a massive private company database, so it allows your associates and your analysts to find the right target companies by searching over 40 firmographic data points - including things like industry or headcount or location. But even more impressive is that that helps you score which target companies are right for reaching out by tracking all the developments." - Nicholas Donato, Industry Strategist at Navatar
Using firmographic and signal data, you can add weights to your investment criteria to develop an account score, then prioritize accounts in real time. When a company you're tracking experiences a relevant milestone, signal data immediately alerts you of this development and prioritizes the account accordingly.
So what does this mean for your deal sourcing strategy? An opportunity to differentiate at the top of the funnel.
DataFox is able to surface and prioritize every good deal within Navatar, giving you the ability to quickly identify which venture is the right high-value target. Managing that network with real-time signals provides you the unique ability to precisely define the timing of when to pursue a deal - giving you the knowledge required to curate credible outreach initiatives. Learn more about how DataFox automates your sourcing strategy so you never miss another good deal!