Seven deal sourcing strategies for investors

The vast majority of an investor's time is devoted to sourcing deals. An effective deal sourcing strategy is a prerequisite for success. According to Chris Dixon, Partner at A16Z, “Success in VC is probably 10% about picking, and 90% about sourcing the right deals and having entrepreneurs choose your firm as a partner.”

In today's competitive dealmaking environment, investors can no longer afford to wait for opportunities to come knocking on their doors—they must proactively source deals.

To keep your deal pipeline full, we’re sharing our top seven strategies to help investors like you improve deal sourcing. 

What is deal sourcing for venture capital firms?

Venture capital firms need to find potential investment opportunities for their VC funds. Deal sourcing is the process that firms use to find these opportunities. There are different ways to approach deal sourcing, but the goal always remains the same—to source high-quality potential deals for VC firms.

7 deal sourcing strategies for investors

Deal sourcing is essential for venture capitalists, and finding ways to improve that process should always be on your radar. These seven tips will help you streamline your deal sourcing strategy and close more deals faster.

1. Diversify your pipeline geographically

One of the most effective means of increasing your investment performance is to diversify your investment pipeline geographically. According to a paper published by Harvard Business Review, although the best-performing venture capital funds are based in three major venture centers—Silicon Valley, Boston, and New York—their success is the result of outsized performance outside of the venture capital firms' office locations.

Unfortunately, investors have a tendency to source deals and invest in companies based in their backyards. According to data from Crunchbase, the tendency to invest “close to home” is apparent among investors specializing in all deal stages, though it is especially pronounced among earlier-stage investors.

Tools like Affinity can help you evaluate how geographically diverse your pipeline is. Use location-based filters to determine how much of your pipeline is located within close proximity to you. If your pipeline is lacking in terms of geographic diversification, relationship intelligence can help identify promising opportunities in new locations beyond your backyard.

2. Tap into the power of social media

Investors are increasingly turning to social media platforms such as Facebook, LinkedIn, and X (Twitter) to help facilitate online deal sourcing. Many investors have strong presences on social media platforms so as to communicate their investment strategy, promote their brand, and connect with other investors and potential portfolio companies. Venture Hacks founder Babak Nivi explains, "[investors are] all over Twitter and blogs...They use social media to source deals and to create a latent relationship with entrepreneurs so they can close the deals they want to."

Developing a strong social media presence can enable investors to become magnets for deal flow opportunities. Lowercase Capital's Chris Sacca is one of many investors who find investment opportunities on X. One of Sacca’s most promising investments, Fanbridge (a fan audience CRM platform), appeared on his radar after tweeting to his followers. He recounts, “Fanbridge came to me after I wrote a tweet asking if there were any bootstrapped, profitable startups with founders working late on a Friday night…They replied that they totally fit that bill. It is now one of my favorite portfolio companies."

As a venture capitalist, you can’t afford to ignore the potential of social media as a goldmine for discovering untapped investment opportunities. Once you've identified opportunities on social media, use Affinity to determine who in your network can facilitate an introduction or a warm referral.

3. Build alliances

Never underestimate the importance of partnerships and your peers. The most effective investors readily share deal flow with other investors in order to gain exposure to a greater pool of potential investment opportunities. They realize that they must collaborate with their industry peers in order to improve deal flow. According to research spearheaded by Teten Advisors, investors “more than make up for whatever competitive edge they lose by giving outsiders a peek at what they’re up to.”

Time and time again, investors tell us that understanding who your peers actually know is incredibly difficult. Tools like LinkedIn fall short of understanding the strength of relationships. With Affinity, you can use Collaborator Seats to share portions of your network securely with other investors. Collaborator Seats help you accelerate portfolio company growth, drive repeat fundraising, referrals, and co-investments, and deliver exceptional experiences. 

Along with your peers, building relationships with intermediaries like investment banks, industry experts, and business brokers can help bring in new opportunities. Industry events are an excellent way to meet more people within the world of VC, but outreach and social media are other great opportunities to grow your network.

4. Get comfortable with conducting outreach

Building a strong network of stakeholders at target companies Is an important part of deal sourcing. But as mentioned above, it goes beyond a network. To foster a healthy deal flow for your VC firm, you need to be connected with industry experts, investment bankers, business brokers, peers, and other dealmakers in your industry to ensure you hear about new opportunities when they arise.

It’s also essential to build outreach into your deal sourcing strategies. You cannot simply wait for opportunities to land in your lap. You have to be actively reaching out to your network to ensure you’re up-to-date on industry trends and news. This proactive approach to relationship building and outreach means you're more likely to be in the know when new opportunities arise, and will be able to take quick action when necessary.

Outbound sourcing will be critical in 2025. Find out why in our new predictions report.

5. Develop your investment thesis and investment criteria

Your investment thesis is the foundation of your deal sourcing efforts, making it essential to your VC firm. An investment thesis is a written document that qualifies new investment opportunities based on market research and analysis. It defines your target market, industry, size, stage, valuation, competitive advantage, pricing structure, and more. Your investment thesis should also reflect your goals, mission, and values as an investor. 

When you have a clear investment thesis and criteria, it’s easier to streamline the deal sourcing process by filtering out opportunities that aren’t aligned. Before you start deal sourcing in earnest, ensure your investment thesis and criteria are up-to-date and reflect your firm's current needs. This will save your team members time as they’ll focus their efforts on potential target companies that meet your investment goals.    

Affinity can help you analyze opportunities by the criteria of your investment thesis with the ability to establish which enriched columns appear in lists or on profile cards in extensions. This gives your team the information they need at their fingertips to easily evaluate companies using the most relevant data points. 

6. Take a data-driven approach

While traditional deal sourcing was time-consuming and often inaccurate, newly available tools have made it easier to take a data-driven approach to the whole process. With the right tools, dealmakers and investors can efficiently capture important data points and quickly screen public and private companies. 

By using data analytics from the entire deal flow, investors can also look back on each deal and analyze what worked and what could be improved during the process. Revisiting past deals and analyzing key metrics can help improve the deal sourcing process moving forward so your VC firm can close more high-quality deals faster. 

Affinity Analytics allows you to review the volume of meetings and emails that each team member is spending on specific deals. These insights can be used to improve outreach marketing, and other activities that drive future deal flow.

7. Invest in a deal sourcing platform

If you’re committed to taking a data-driven approach to deal sourcing, you should invest in a deal sourcing or deal origination platform. Deal sourcing platforms use advanced technology, enriched industry data, and analytics to match VC firms with potential deals. These platforms can provide real-time insights into your network, help you make better investment decisions, and bolster business development efforts.  

Improve your deal sourcing process with Affinity

Deal sourcing is arguably the most important aspect of an investor’s work. It is a key source of sustainable competitive advantage. Finding the right tools to support that work is essential. 

Affinity empowers your firm to improve deal sourcing and identify promising opportunities, giving you a competitive advantage. A CRM platform powered by relationship intelligence, Affinity provides insights into your entire firm's network, relationships, and interactions to help deal teams find and close deals more effectively. 

Does your organization already use Salesforce? Get all the benefits of Affinity’s relationship intelligence and automation capabilities with Affinity for Salesforce. 

Reach out to us and get a personalized demo. 

Deal sourcing FAQs

What is a deal sourcing platform?

Deal sourcing platforms are designed to help discover potential acquisition or investment opportunities in the most efficient way possible. These platforms streamline and automate the process, saving firms time and money. 

What are the steps of the deal sourcing process? 

The deal sourcing process consists of seven steps:

1. Build your deal sourcing team of experts.
2. Choose a deal sourcing strategy.
3. Create a list of potential investment opportunities.
4. Conduct initial research to see if opportunities align with your goals.
5. Shortlist businesses that align with your strategy.
6. Connect with stakeholders at target businesses.
7. Develop strategies to move deals forward.

What is deal origination? 

Deal origination is the process of sourcing investment opportunities. 

How can due diligence impact the deal sourcing process?

Due diligence should happen throughout the deal sourcing process. It helps you understand if a potential deal is aligned with your investment thesis and criteria. You should use reliable data sources—like market trends and research, customer surveys, expert opinions, and industry reports—to evaluate each opportunity. Download your free due diligence checklist to learn what you can do to make your due diligence process more thorough. 

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