Deal flow
Encyclopedia
Deal flow is a term used by finance
professionals such as venture capitalists, angel investor
s, private equity
investors and investment bankers to refer to the rate at which they receive business proposals/investment offers. The term is also used not as a measure of rate, but simply to refer to the stream of offers or opportunities as a collective whole. An organization's deal flow is considered "good" if it results in enough revenue- or equity-generating opportunities to keep the organization functioning at peak capacity.
a deal; and from professionals (such as attorneys and accountants) who are familiar with the fund's investment criteria. Other sources of deal flow are investment bankers and "finders", who expect to receive a fee (from either the company or the investor) for making the introduction.
Many funds and groups (but not all) will also accept business plans "over the transom", that is, as an unreferred submission from a company with no previous relationship with the funding organization. In practice, however, such unreferred plans are usually much less likely to receive funding.
In order to create and maintain a sufficient deal flow, venture capitalists and angels spend much of their time doing business development
, raising their profiles by giving speeches, writing blogs, and networking with others who also work with early stage companies. VCs and angels also regularly attend conferences and "venture fairs"" where multiple companies pitch
their businesses to investors.
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
professionals such as venture capitalists, angel investor
Angel investor
An angel investor or angel is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity...
s, private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
investors and investment bankers to refer to the rate at which they receive business proposals/investment offers. The term is also used not as a measure of rate, but simply to refer to the stream of offers or opportunities as a collective whole. An organization's deal flow is considered "good" if it results in enough revenue- or equity-generating opportunities to keep the organization functioning at peak capacity.
In venture capital
The most famous and successful venture capital firms regularly receive hundreds of business plans each month. From among these, it is not unusual for a VC firm to actually fund only 0.25% — 0.5%. Active angel investment groups will typically receive dozens of plans monthly, but because of the much smaller number of plans compared to VCs they tend to fund a somewhat higher percentage (0.5% — 1.0%). Once a company makes it through the group's screening process, however and is invited to present to the group's full membership, its chances of getting funded rise to about 18%, according to the University of New Hampshire's Center for Venture Research.Sources of deal flow
A fund's or group's deal flow is generated from many sources. The most valuable referrals often come from entrepreneurs or companies in which the fund has previously invested; from other funds looking to syndicateSyndicate
A syndicate is a self-organizing group of individuals, companies or entities formed to transact some specific business, or to promote a common interest or in the case of criminals, to engage in organized crime...
a deal; and from professionals (such as attorneys and accountants) who are familiar with the fund's investment criteria. Other sources of deal flow are investment bankers and "finders", who expect to receive a fee (from either the company or the investor) for making the introduction.
Many funds and groups (but not all) will also accept business plans "over the transom", that is, as an unreferred submission from a company with no previous relationship with the funding organization. In practice, however, such unreferred plans are usually much less likely to receive funding.
In order to create and maintain a sufficient deal flow, venture capitalists and angels spend much of their time doing business development
Business development
A subset of the field of commerce, business development comprises a number of techniques and responsibilities which aim at:1. Researching new types of business/products/services with an emphasis on identifying gaps in the mitigation of needs of potential clients .2. Attracting new customers3...
, raising their profiles by giving speeches, writing blogs, and networking with others who also work with early stage companies. VCs and angels also regularly attend conferences and "venture fairs"" where multiple companies pitch
Sales Pitch
Sales Pitch is a science fiction short story by Philip K. Dick, first published in Future Science Fiction magazine, June 1954. The premise of omni-present, intrusive and even aggressive advertising and marketing is as relevant as ever. In the end of the story, the character is driven mad by a robot...
their businesses to investors.