The value of relationship intelligence can’t be underestimated, especially during a slower market. Investment professionals have some of the largest professional networks in the world. Relationship intelligence gives them instant access to insights about their organization’s shared business network, which lets them find, manage, and close deals more efficiently. And at a time when dry powder is high but deal volume is down, it can mean the difference between securing or losing out on the best deals in a shrinking pool of candidates.
What role does relationship intelligence play in a slower market?
The world’s three biggest economies—the United States, the EU, and China—are simultaneously slowing and this is weakening global activity. A slower global market affects interest rates, inflation, and unemployment. In turn, these factors have the potential to impact deal volume—although the jury is still out on if they will lead to a shrinkage. In fact, two-thirds of respondents to a survey for Affinity’s 2023 investment predictions report believe that deal volume will remain the same or go up this year.
And uncertainty doesn’t necessarily lead to a shortage of dealmaking opportunities. On the contrary, for those with funds available to invest, a slowing market can present a golden opportunity.
For example, there is less competition right now—and more time to dive deeper into the due diligence process. Speaking on this topic, Sakib Dadi, Vice President at Bessemer Venture Partners said:
“The market has definitely slowed down a lot from where we were in 2021, where it felt like deals were happening every single day. And I don't think that's necessarily a bad thing. It feels like folks are really taking the time to do due diligence, build relationships with founders, and spend time with companies prior to investing. That’s all great to see. And there's still a lot of venture dollars out there to be invested.
While it's not the pace of 2021, we're still seeing founders—especially at the early stages—start companies. I mean, people haven't stopped building or making companies just yet.”
With more time to thoroughly vet prospects, dealmakers can create pitches that are more tailored to each individual deal. When a dealmaker can show founders that they don’t just understand their market and challenges, but can also highlight and help them capitalize on opportunities, a deal is more likely to be won.
Even those dealmakers not currently focused on growing their portfolios can take advantage of relationship intelligence in a changing business landscape. Using the insights generated by relationship intelligence, dealmakers can use this time to identify meaningful ways to grow their network and double-down on creating connections with founders and business leaders.
Founders will also appreciate the attention, as highlighted by Maleka Momand, Co-Founder & CEO of Esper.
“Conversations with potential investors have become much richer, and there’s almost less pressure in the conversation,” says Momand. “We’re not raising. They’re not deploying capital. The conversations feel more free-flowing.”
How to manage time more efficiently
Data is only as powerful as an investor’s ability to use it. With Affinity, dealmakers can access easy-to-understand relationship insights, including a data-backed relationship score and the strongest paths of introduction. Eugene Lee, Partner at OMERS B2B, shared how valuable this can be when combined with other sources, including purchase data from a source like ITSpend:
“Structuring incoming data in the correct way allows you to see a true signal versus noise. There are just so many companies that you have to know how to parse it out.”
With more time to dedicate to research and due diligence, dealmakers can take a holistic approach to their sourcing strategy to identify deals before their competitors. For Kevin Zhang, Partner at Bain Capital Ventures, this means zooming out to incorporate data signals that are relevant at the company, rather than purely the individual, level.
“Before, if we could discover opportunities earlier, it was important to have relationship intelligence on a person that might start a business. Now, we’re incorporating more data-driven signals around company growth rather than the individual.”
Creating new sources of insight
Relationship intelligence may come from different sources, but one thing is clear: the data-driven signals it provides offers new opportunities for dealmaking in a slower market.
Zhang says that the Bain Capital team is always learning, but has noticed some things that seem interesting when it comes to tapping new sources of insight—things like commercial car data and commercial spending data. Using GitHub, his team has picked up on signals around developer communities like Discord, Slack, and Twitter.
“People are talking more about their products in public communities, for better or for worse,” he says. If dealmakers are listening, they might uncover the next big, untapped opportunity.
So, while your gut might tell you that a slower market means it’s time to hit the panic button, that’s not necessarily the case. By getting creative with how you use relationship intelligence and finding new and unique ways of looking at data, you can continue to uncover the highest quality deals for your firm.
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