Deal pipeline management and sales pipeline management couldn’t be more different. At a glance, a person outside of the investment world might see a deal flow pipeline in your CRM and think “that’s a sales flow.” Your deal pipeline is full of opportunities that were won, lost, or (like 99% of your firm’s deals) passed on—just like a sales funnel.
Investment opportunities aren’t managed in the same way that sales are though, and it’s important that your team has a CRM that is built to handle the unique requirements of managing a deal flow pipeline. Let’s dive into what makes VC deal flow different and how your CRM should help manage those differences.
{{DM-guide-202408="/rt-components"}}
Transactional sales vs. relationship-driven deal-making
Traditional sales flow
Traditional CRM solutions are built to track a sale from the time a lead is generated to the moment an opportunity is closed. Let’s use a customer journey for a Software as a Service (SaaS) company as an example.
Before a contact ever reaches a sales team, the marketing team will work to drive brand awareness to attract leads, educate and qualify those leads, and work to map the company’s product or service to the lead’s needs. Marketing then hands the qualified lead off to the sales team.
Sales will process the lead, ensure they are a good fit for the product or service, and continue to educate (in the SaaS world this is often through a demo presentation) to sell. Once the sale is closed, that lead is handed over to an account manager, and the salesperson continues with the rest of the leads flowing in.
Venture capital deal flow
Venture capital deals rely on a more complex, more relationship-driven process. Your team isn’t spending its time and resources hunting down cold opportunities or fishing for leads (only 10% of VC deals come from cold email pitches), and they aren’t waiting on new leads from a marketing machine. While your firm’s brand reputation does have an impact on your ability to network and source deals, more than half of VC deals come from referrals.
These referrals can be from other investors, your existing portfolio companies, or other companies industries you invest in. This means that unlike in traditional sales where once a lead makes a purchase they are handed off to someone else, VCs are responsible for nurturing ongoing relationships because they continue to open doors to new deals. The more informed a VC is, the better they can build long-term relationships and continue to build quality deal flow.
Venture capital deal flow is built and managed based on your team’s existing network and how well they maintain their highest quality relationships. With this all in mind, let’s take a look at how your CRM should support your deal management with automated activity tracking and relationship intelligence.
Manual data entry vs. automated activity tracking
Traditional sales CRM platforms require contact records to be manually curated and updated. Unfortunately, when your team could be conducting diligence on hundreds of companies at a time and being introduced to hundreds more, it’s easy to forget to log an email or a phone call into your CRM. Data entry can easily fall to the wayside, and the team falls into a spiral:
- Data isn’t entered into the CRM properly or regularly, so the data becomes inaccurate;
- The data is inaccurate, so no one refers to the data in the CRM;
- New data is no longer entered into the CRM because of low adoption rates;
- The system falls into disuse, and no one knows what is current or correct.
A venture capital CRM should serve as a reliable source of information for your team’s deal flow by automatically capturing interactions. A CRM that automatically creates a record of emails, calls, and meetings guarantees that your team can collaborate without potentially overlapping.
Each of these points of contact provides valuable context into your team’s relationship with a given person or organization. Tracking them automatically means your team can also focus on building and nurturing relationships rather than either spending time entering data or, worse yet, not entering data at all.
Manual data sourcing vs. relationship intelligence
Most transactional sales teams aren’t selling directly to their existing network. Sourcing new leads requires them to cast wide marketing nets to get prospects into a funnel. In VC deals, where your network is your primary source of new prospects and connections, gaining insight into who your team knows outside of your immediate network opens up valuable opportunities.
If the data in manually managed CRM is already sparse, the only way to discover second or third-hand connections to leads is to dig through social media and dozens of online data vendors. Even then, you can only hope that you find a way to get your foot in the door.
Relationship intelligence algorithms expand the pool of data available to you and your team directly in your CRM to help you source more deals within your collective network. Tools like relationship scoring can help identify who on your team has a connection to an organization you want to meet with, providing a direct, warm introduction to your next opportunity.
{{DM-guide-202408="/rt-components"}}
Build a better deal pipeline with a VC CRM
Each tool in your firm’s tech stack should serve to make you a better VC. This includes your CRM. Choosing a VC CRM designed for the unique world of investment deals saves you time and lets you focus your energy on closing deals instead of manually managing your contact records. Build more impactful, longer-lasting relationships and close higher quality deals with a CRM built for venture capital.
{{request-demo="/rt-components"}}
.webp)
