For private equity firms with vast amounts of dry powder, the search is always on for the next great outreach and outbound deal flow sourcing solution or automation tool. As a result, it’s easy to overlook the fundamentals that have governed how deals have been done for centuries. One of these simple premises is that people do business with people they like, trust, and respect.
This axiom holds doubly true for deals in the private markets. Private equity, investment banking, mergers and acquisitions, and venture capital deals are no ordinary transactions – they are generally large, distinctive, and have massive long-term implications for everyone involved. There’s a reason why people describe investment in the private markets as akin to a marriage. These elements make establishing relationships and trust even more critical in each step of the deal process – from deal sourcing and due diligence to deal value creation and exit.
This perspective isn’t just axiomatic but supported by academic research – with multiple studies showing that most high-quality private equity investments come from or are influenced by your network.
So, if your network is the strongest and most important engine for generating private equity deal flow – how do you make that engine even more powerful?
A Framework for Generating Deal Volume from Your Network
While human relationships are complex and multifaceted, making your network a more valuable source of high-quality deal flow can be broken down into a few simple dimensions:
The number of people who have a relationship with you (direct or via your reputation)
This can be both direct, forged by shared experience and 1-1 time, or more passive – writers, artists, and others with a massive audience have a relationship with their fans, even though they may not have had a direct engagement.
The relevance of those people to your goals and objectives
While relationships are valuable for their own sake, and many people have ways they can create value for you – there’s no denying that some people’s focus areas will overlap more with yours. Cultivating those relationships (and adding more like them!) results in more deals flowing your way.
The strength of those relationships (+ how you treat people)
You may be ‘connected’ to many relevant people, but when making a referral, those people will default to those they have a real connection with or see as valuable. As a result, the strength of your relationships – your personal connection with them and the value you bring to each other – is arguably the most crucial driver in getting inbound deal flow from your network. Notably, a relationship’s strength isn’t static – connections you invest in can flourish, and relationships you ignore can quickly decay.This framework also suggests a set of levers for how you can continually make your network a more powerful asset for fundraising and generating PE deal flow:
Determine where to spend your time and resources
Deepen your connections in those domains through intentional effort
Grow your influence in those areas to expose yourselves to more pathways to generate deals.
A note on the tactics to come – while we’ve put each in only one of the three categories (growing your network, making your network relevant, deepening your connections), they can be deployed across multiple. For instance, building a digital community deepens existing relationships and exposes new, relevant ones!
Step #1: Set your Focus
In private capital, your investment strategy, investment thesis, and focus are fundamental in creating more investment opportunities and deal origination from your network. After all, if you don’t know where you’re going, any route will take you there! Some elements to help you inform your focus:
Passion: relationship building and network curation is a long-term game. It’s far easier to invest for the long term in areas you genuinely find interesting. In addition, your relationships will be of higher quality – founded on shared interests where you’ll have more to offer.
Opportunity: finding great deals requires spotting and seizing the opportunity others don’t see (or see as clearly). Your belief about where opportunities are should inform where you choose to dive deeper.
Rules of engagement: none of us operate in a vacuum, so some likely constraints and biases mean some opportunities may be off-limits (explicitly or implicitly). These could be defined by stage, sector, geography, or any number of different attributes – but have implications for where your time is well spent.
Advantages: your life experiences are unique and likely give you differentiated access, skills, or inclinations vs. your peers. You can double down on those advantages as you build your network.
Once you have a set of areas in mind, you’ll want to identify the relevant sources of potential investments or deal flow in these domains. A few categories that commonly are great referral sources:
Domain experts: for any particular industry vertical or function, there are usually experts in these areas with deep networks and knowledge. People ask them for advice, and they dedicate resources to staying on top of the significant and rising players – and as a result, they’re often aware of great companies before they become broadly known.
Fellow investors: private equity companies, venture capitalists, and other dealmakers and GPs are spending as much time as you are trying to find great investments – but not every great company will be a fit for them. This could be due to size, valuation, stage, industry focus, liquidity or cash flow issues, prior experiences, or several other issues. As a result, other investors – even those that are ‘competitive’ to you – can end up being good sources of deals.
Service providers: lawyers, accountants, insurance brokers, local banks, investment banks, and others who work with CEOs and business owners likely know of impressive, under-the-radar companies. Moreover, these professionals work daily to become trusted advisors to those owners – making them key sources of influence in beginning a conversation.
Intermediaries: investment bankers, business brokers, and M&A advisors exist to find companies ready to go through a transaction process and help them find the right investor. While in some domains (e.g., venture capital firms), it’s far better for the management team to handle the process – these intermediaries always come into contact with potentially relevant companies due to their work. This audience is especially relevant for leveraged buyout (LBO) and private equity fund deal teams in the middle market.
Corporate Development + Business Development teams: in larger organizations, these departments are tasked with understanding the ecosystem of relevant players to their business. As a result, members of these teams often have unique insight into under-the-radar private companies or early-stage startups that are relevant to their world, key trends they’re monitoring, and where their acquisition and partnership interests lie.
Your portfolio companies: given their proximity to you, other operators in industries you like, and your faith in their judgment, portfolio company team members, especially the CEO, CPO, and CFO, can be precious sources of deal flow and information.
Once you have laid out your understanding of the relevant deal sources, you can assess your existing relationship network and how it’s currently driving your sourcing deals:
First, you should understand where you are winning. Some questions that can help illuminate this:
Where are most of your quality deals coming from? If you were to analyze the deal flow you received from inbound sources over the past year, which sources drive most of your volume, especially those making it further down the funnel? This can be easily identified using the right deal management software.
Where is your “share” of deal flow the highest? Some people may not send a high volume of referrals due to the nature of their work and network. But when they are connected to companies that have successfully raised, are they putting these on your radar?
Qualitatively, which domains do you feel confident about the strength and depth of your relationships?
You’ll also need to identify the gaps in your current network. Some questions to help identify these areas:
What deals did you miss? A data-driven way to ground this conversation is to use Pitchbook, Crunchbase, Sutton Place Strategies, or similar and pull together a list of deals completed in your strike zone in the past year that you never saw. You can then cross-reference that list of deals with the participants and your network – allowing you to identify relationship gaps.
Where are you missing coverage? If you were to slice your network by deal source type, geography, industry, or other focus areas, where does it seem you have little density? In some cases, that may be a function of the domain – for instance, there may be few accountants that work closely with AI companies specifically. In other domains, this may point to an opportunity to bolster your deal flow network.
What categories do you have weak relationships with? Even where you have relationships, some are likely weaker than others, which impacts the volume and quality of deals you receive.From here, you can make a plan composed of doubling down on your strengths while attacking some of the gaps you’ve identified. One way to make your prioritization decisions easier is to run them through the following test:
How many new quality deals would come my way by successfully building (or strengthening this relationship)?
How difficult would it be to strengthen them to see those benefits?
With a plan to generate more deal flow, it’s time to execute. The following two sections (“Deepen your connections” and “Grow your network”) give you the tactics to help you achieve relationship-building and deal-generating success.
Step #2: Deepen your Connections
1-on-1 Relationship Building
While relationships can get stronger in a group setting (which we’ll cover later on), connecting with someone 1-on-1 is always a powerful way of getting to know someone on a deeper level.
As you engage, it’s easy to focus on the transactional and tactical (e.g., what deal flow are you looking for, and how does that overlap with my goals?). However, remember that people do business with others they trust and respect – if this person chooses to refer a deal to you and someone else, it’s unlikely this approach wins you a referral. Instead, devote real time to building both a personal and professional connection. Some topics to help you create that:
Personal backstory: Where did they grow up? What has their personal and professional journey been to get to this point?
Interests and family life: What are their priorities outside of work? Do they have a family? What are their hobbies?
Their objectives: What does success look like for them personally and their team? What are they focused on? What are they trying to learn more about? Where could they use additional support and resources?
When you have a richer perspective on who a person is and what they care about, you not only build relationships beyond any given deal – you’re far better positioned to create value for each other (including deal flow and referrals).
You can’t expect that richer perspective to translate into a robust (and deal-generating) relationship automatically. Most relationships only get stronger through regular interactions that reinforce your connection. Some ways to help your relationship go further:
Help them meet their goals: this can take many forms on both a personal and professional level.
Sending them research reports, news, and other notable information about an area they’re trying to get up to speed on – or that ties to their passion.
Amplifying their work – sharing content they produce and purchasing products and services they create
Connecting them with experts that can be a valuable part of their network
Making introductions and referrals to others in your network that fit their area of focus
Show a genuine interest in them and their lives, and show how they’ve impacted yours:
Connect over hobbies: if you both enjoy golf, suggest that they join you on your next golf outing. Or you can go for a run together before the start of a conference you’re both attending.
Engage on events that impact them: when they or their company has been in the news recently, have closed a major deal, or even when they’ve got a freak weather storm in their area – all represent opportunities to check in and strengthen the relationship.
Close the loop: let them know if something they’ve done (books they told you about, etc.) was helpful. If they’ve sent you deals, respond with a thoughtful note about your decision-making process and thank them for the opportunity.
Set a regular time aside to reconnect:
Recurring meetings: as the relationship grows (especially if the work you do overlaps materially), it may make sense to put regular time on the calendar to catch up more generally and share opportunities each way. These can be calls, coffee, lunches – whatever makes the most sense for your schedule and logistics. Getting access to proprietary deal flow and referrals in the private equity market requires staying top of mind.
Opportunistic: You can also use travel to their city or other emergent events in the world as moments to authentically engage and build connection.
Community Building
Relationships aren’t just one-to-one or one-to-many (e.g., content) – some of our most powerful connections are in a group context (many-to-many). By bringing people together around shared interests and passions, you help people form valuable bonds and share resources to accelerate each other’s progress. You create a virtuous cycle where you all become smarter and better together.
In addition, you may be introduced to new connections, companies, and themes that help you in your quest to find your next great investment or build your deal flow funnel.
Hosting Events
One way to increase the value each community member gets from your interactions is identifying a commonality or interest they all share and structuring the guest list and agenda around those topics. Similar to company building, the list of spaces and niches can spark your thinking:
Industry: Depending on your areas of focus (or where your geography has density), you can organize events of industry practitioners and enthusiasts to discuss current events and trends and share tactics.
⭐️Good examples: Chicagoland Food & Beverage Network (Food & Beverage), J.P. Morgan Healthcare Conference (Healthcare)
Challenge: One commonality of building and running a company is that there are always problems – and while not all situations are the same, there are often common pain points and transferable lessons. Many companies struggle with recruiting great talent fast enough, scaling operationally, building communities, etc. By building communities to discuss these topics, you don’t have to have the answers – just access to people who can bring insight.
⭐️ Good examples: Atlas Holdings’ Atlas Leadership Academy
Function: Similarly, bringing together people in specific functions you find interesting to discuss common challenges, tools, and case studies of success can be another powerful way to create community.
Trend: As new technology and cultural waves emerge (e.g., VR / AR, AI, remote work), the ripple effects have enormous implications for how we work and live. Your events can help people understand these implications across multiple dimensions (industries, functions, roles, etc.). ⭐️ Good examples: Industrial Exchange (Industrial Technology)
Geography: Being in close physical proximity is enough to generate value. Each geography comes with a unique set of challenges, advantages, and cultural perspectives worth exploring.
⭐️ Good examples: Chicago Real Estate Private Equity Network
Digital Community Building
While events require getting people together simultaneously, you can also build community asynchronously by using digital tools to spark and maintain connectivity.
Some examples:
Online chat/discussion groups: similar to themed events, getting people together to discuss topics of mutual interest and share generates value for everyone.
⭐️Good resource: Slack
Email distribution lists: Not everyone wants to join a new platform – so an easy place to default to for conversation is the email inbox. Setting up a common distribution list reduces the friction to sharing and conversation amongst your group!
⭐️Good resource: Google Groups
Portals/forums: You can also invest in building out a more robust and customized set of functionality and resources for your community. These can be as lightweight as a Google Drive folder or an Airtable sheet with links, or a custom-built solution that integrates all the core tools you’d like to have.⭐️ Good examples: Techstars Connect
Physical Space Creation
Most of the methods of community building so far create structured formats to engage.
However, a tradeoff that comes with structure is less serendipity. The random hallway conversations that often move relationships to a deeper level are hard to manufacture.
One way to enable more moments like these is by carving out a physical space for more impromptu interactions.
Some VC firms or PE firms enable their portfolio companies, common co-investors, and friends of the firm to work out of their offices, and they maintain extra space for this purpose. While non-traditional, these can be excellent sources of deal flow over time.
Gifts
Free swag is a classic way to denote a friend of a firm (portfolio founder, advisor, close collaborator). In addition to the natural, relationship-building goodwill that a gift generates, each use is a durable reminder of you – helping you stay top of mind in an increasingly hectic world.
One of the most common (and most parodied) is a vest or jacket with the firm’s logo – but there are tons of other apparel (socks, shirts, sneakers, backpacks) and non-apparel (pens, mugs, playing cards) options out there. When executed well, your swag can become a status symbol of its own!
⭐️Good resources: A swag provider’s list of popular items
Step #3: Grow your Network
Content
Guest Posting
In almost every domain, some publishers are seen as trusted sources of news or insight. These usually come with two important kinds of currency: an audience and credibility. Many are often interested in publishing the work of others, so long as there is a unique perspective you can bring to bear. This is true of digital media businesses (whose business relies on them being prolific) and bloggers who write to share what they’re learning.
⭐️Private Equity focused publications: Pitchbook, Private Equity International (and their sub-brands like Buyouts Insider), The Deal
Writing Email Newsletters
Email newsletters are popular ways to build mindshare – when your audience is heavily engaged with their inboxes, meeting them where they are is a strong recipe for engagement. This is particularly true with the rise of newsletter + audience management products. These typically have one or more of the following:
Third-party curation: helping private equity investors sort through the high volume of content/products generated on a daily basis to surface the pieces worth their time to consume (ideally with commentary around why it’s worth the reader’s time or money).
News + round-up distribution: these are probably the most common and include major news announcements (investments, new funds, new team members). For funds active in other content formats, this can also include a round-up of prior work created. Various venture capital firms have done a great job of building huge newsletter audiences.
Content + course distribution: these are new pieces developed specifically for newsletter distribution, or courses that help readers level up in a specific area of focus.
⭐️ Good example: LLR’s learning hub (and newsletter)
Maintaining a Blog
Though it’s rare for a private equity investor to maintain a blog, many funds have a section on their website for the content they’ve generated and market publicly.
In addition to serving as a more permanent home for content your team has created/been a part of, blog articles can range from quick, two-paragraph perspectives on what you see in the market (or answering common questions) to in-depth research pieces that demonstrate your understanding of a particular space.
For example, write about topics relevant to your stakeholders, including limited partners, other general partners, target companies, etc. Over the past few months, PE firms have published content about the recent rising interest rates and their effects on deal volume, among other relevant topics related to the slowdown in deal activity in the second half of 2022 and early 2023.
You can host your firm’s blog on a site of your own or a publishing platform (e.g., Medium). Quickly running through the advantages of each:
Hosting your blog on your own:
Control of experience: because you’re not constrained by the design aesthetic or philosophy of the platform provider, you can customize your reader’s experience to fit your goals best.
Ownership: your subscriber base is yours, allowing you to more efficiently utilize it for other (non-blog related) endeavors and retain it if you decide to switch platforms.
SEO: generally less of a focus for an individual investor or fund, but there are material SEO benefits from publishing on your domain and monitoring your traffic metrics. There are several best practices you can implement to boost your SEO.
Publishing through Medium or similar:
No set-up required: with a few clicks, you can start writing – limiting the time and energy that often comes with having a lot of control.
Built-in distribution: enabling your ideas to be read by a broader audience and maximize exposure.
To get the best of both worlds, you’ll often see people publish content on their web presence and then re-publish on Medium.
Podcasting
Podcasts are exploding as a content consumption format for educational and entertainment purposes. With that explosion comes an opportunity to build relationships and attract listeners interested in your views, increasing your surface area for exciting deals. The two most common approaches we’ve seen:
- Getting on podcasts as a guest: one approach is to serve as a guest on an existing podcast. Like guest posting, so long as you have a unique perspective, you can get exposure to a pre-existing audience and start building a relationship.
Making your own: you can also build a podcast presence! Some common formats:
Interviews/case studies: finding domain experts or CEOs / operators with unique stories to tell and answering good questions to help the lessons/insights from their experience come to light.
Roundtables: discussing news, trends, or a specific area of focus by pulling together a set of experts in your network who understand the issues at hand deeply.
Q&A: soliciting and answering questions from management teams on the belief that those answers will be relevant to a broader audience.
Knowledge sharing is especially relevant when you’ve got domain experience to share (e.g., the top 5 lessons learned to navigate economic headwinds).
Video
- These could be recorded videos from events or webinars you’ve put together (see the events section for more on those) or specifically developed content. The formats tend to be quite similar to the ones in the podcast section:
- Interviews/case studies
- Roundtables
- Q&A
- Knowledge sharing
⭐️Good example: Vista Equity Partners displaying their commitment to executive team support
Social Media
While social is also a distribution channel for content, these media also represent an opportunity to learn, share, and build – relationships, brands, and communities – which can generate deal flow.
Some subsets of the private market ecosystem use LinkedIn to share their learnings resources they find valuable or catalyze conversations among their connections. If your LinkedIn network is curated enough, it can also be used to stay on top of some of the events happening in your network – including job changes, deal flow, fundraising, or posts they’ve published.
In addition to your existing network on LinkedIn, there are several professional associations and groups on LinkedIn that you can join – amplifying the number of conversations you can participate in and providing a source of relevant people you can include in your network.
While the noisiness of LinkedIn can be tricky to navigate, it certainly can be a solid relationship-building tool when used well.
⭐️Good example: Jordan Sellick (DebtMaven)
Relationships blend across personal and professional lines more than ever in today’s world – and so it’s pretty common to have predominantly professional connections now as Facebook friends. While not all of your professional relationships will be open to connecting here (and you might not be excited about the prospect), you’ll often see a different, more personal side of your connections on Facebook than in other areas.
Similar to LinkedIn, there are also several high-quality Facebook groups with industry practitioners that you can join. This is especially true of specific verticals you’re focusing on – with Facebook’s scale, there are vanishingly few professions or interests that don’t have groups with thousands of members. Plugging into these groups gives you a direct pulse of the core concerns impacting their day-to-day work and allows you to hear about companies you should be tracking for deal flow purposes.
Twitter (X)
X isn’t as popular with private equity firms but can be a goldmine of relevant information about critical events in your focus areas. For any niche, there’s an active Twitter audience engaging around the day’s relevant topics.
One of X’s defining features is the speed of information transmission, allowing your commentary and influence to spread quickly. Several investors have built strong relationships and audiences essentially out of nowhere due to their mastery of the medium.
⭐️Good examples: Joe Burkhart (Saratoga Investment Corp), Bronwyn Bailey (First Republic)
Attending Events
Having a presence at and piggybacking off pre-existing events also allows you to build relationships with relevant stakeholders. Similar to the above – depending on the industry you’re in and your focus areas, there’s likely a host of events you can participate in (e.g., ACG events, SaaStr for enterprise software companies, Expo West for food and beverage companies). There are also general meetups where other investors and LPs congregate, serving as great opportunities to reconnect with community members.
Outside of just attending the event, below are some other common ways of generating more relationship-building opportunities for yourself (and thereby more deal flow):
Presenting/speaking: getting on stage and providing your views on a market, sharing knowledge and resources, or participating on a panel are all opportunities to help others and kickstart a relationship with fellow speakers and audience members.
Sponsorships: through in-kind or monetary support of an event, you are rewarded with different opportunities to get yourself and your firm in front of others – including premium brand placement, speaking opportunities, and private events.
Organizing side events: Putting together curated dinners, outings, or other gatherings allows you to build a tighter bond with specific people you want to deepen your relationships with.
Conclusion
Few firms would disagree with the premise that your success is primarily driven by the volume and quality of the opportunities your team can source. After all, you miss 100% of the shots you don’t take (or never get to shoot in the first place).
Though that perspective is true, that statement is focused on outcomes (which you can’t control) vs. being focused on drivers you can control. A more useful statement: your success is primarily driven by the strength and quality of your relationship network. We hope this guide inspires you to take the steps to maximize it to its fullest potential.
And if you’re looking for software to help you maximize that network while also streamlining your firm’s deal flow management, look at our Private Equity CRM.
