In order to be successful, venture capital firms are required to closely manage new business opportunities as they enter and exit the firm’s purview. While it may sound simple, in real life it is far from easy. Taking control of the deal flow requires your firm to have a deal management strategy and a sophisticated VC deal flow management software. Without one or the other, venture capital deal professionals will waste precious time and energy chasing potential opportunities that never come to fruition.
As the venture capital industry has professionalized and gotten more sophisticated over time, professionals have increasingly relied on technology to help them develop and deliver a deal management strategy that every dealmaker can leverage. In order to truly achieve the firm’s goals, however, the technology that is leveraged needs to be flexible and customizable, since every firm’s strategy is unique. The DealCloud platform, built by investors, advisors, and finance professionals, allows VC firms to both monitor deal flow and manage the entire deal process from start to finish.
What is deal flow and why does it matter?
Deal flow is the lifeblood of the capital markets industry. It is the product of the constant buying and selling of assets in order to generate returns and meet stakeholder expectations. As a result, capital markets firms seek to generate deal flow that they can offer to buyers, and buyers seek to capture that same deal flow from the intermediaries who generate it.
If you’ve ever executed on a private market transaction, you know that while it may seem like there’s a simple 1:1 ratio for buyers and sellers, that’s hardly the case in real life. One transaction—such as a successful consumer goods business owner looking to grow and seek investment from a venture capital firm with expertise in the industry—could have hundreds of potential buyers. That means that the intermediary has tons of work to do to “flow” that deal to all of the appropriate investors. On the flip side, private equity, venture capital, and other buyers and investors, knowing that they are not the only ones being approached with new deal opportunities, try to increase their “flow” by introducing themselves to hundreds – if not thousands – of new businesses and transaction advisors each year.
This back-and-forth communication on all sides of the transaction is deal flow in action. Deal flow can be strong, and it can be weak, but that ultimately depends on two factors: 1) the firm’s ability to manage deal flow and 2) outstanding factors in the market (recession, down-turns, trade, disruption, etc.)
What is deal management and why does it matter?
Deal management is the practice of monitoring and administering transactions in the capital markets. Deal managers (also known as deal professionals) are tasked with evaluating new opportunities and dealflow to see if buying/selling assets is either complimentary to the existing portfolio, appropriate as a net new asset to be bought, or if selling assets would provide an opportunity to generate returns on the initial investment.
This entire practice is not only complex, it is often a shared responsibility across multiple team members. When a proper deal management strategy is not in place at a venture capital firm, mistakes are easily made and deadlines are often missed. Every time a component of the deal management process breaks down, it increases the likelihood that the deal will not close all together or won’t close as expected. That essentially leads to wasted time and effort for no result. This is not an ideal outcome no matter the industry, but is particularly devastating for venture capital firms who then lose stature in the market and fail to deliver on the promises that are made to founders and owners.
When a proper venture capital deal management solution, like DealCloud, is in place, all of these details and unintended consequences are accounted for and represented in the software. Every deadline, every task, every data point, and every opportunity are accounted for in the DealCloud platform, making it easier than ever to keep records clean and up-to-date. Busy dealmakers can update details for a transaction they’re working on through a mobile device (DealCloud’s mobile app supports VC deal flows) or even from inside their email. Should any part of the deal management process be missed or a deadline dropped, the system can be configured to send alerts to project owners so that the error can be rectified. Essentially, DealCloud’s product creates a smooth and easy to navigate pathway so that dealmakers can walk, run, or sprint towards the closing of their next deal.
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Why you need DealCloud’s VC deal flow management software
Now is the time to bolster your competitive edge as a firm. You have the relationships and the knowledge to win deals—the rest is just execution. And deal execution is exactly what DealCloud enables. Our deal management software allows dealmakers—specifically those in the venture capital, private equity, and investment banking industries—to maximize the time they spend building and growing relationships because their deal management worries are taken care of.
Closing multi-million dollar transactions doesn’t happen overnight. Unfortunately, the fact that deals are often slow and sometimes painful processes is not likely to change in the near future. So, it’s time to harness the power of a platform that was built specifically to manage public and private market transactions.
No matter if your firm is looking to increase deal flow and open up the top of the funnel activity or if it is seeking to move transaction through the deal management process more quickly, it’s time to take action with a partner that knows the road ahead. DealCloud’s venture capital-specific technology takes into account all of the unique elements of your firm and allows data to flow through reports and dashboards easily. With a single source of truth for all deals and deal management processes, DealCloud allows venture capitalists to work more efficiently and close more deals.
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