How the sausage is made. Part 1: Sourcing

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This week we’ll be diving into venture investing and what it takes to find the best investment opportunities.

There’s four key pillars to venture investing: sourcing, selecting, shaping and selling. If an investor wants to be successful, each of these pillars must be accurately executed. Today we’ll be focusing on pillar one; sourcing. As you can probably guess, sourcing is all about finding the best investment opportunities. Sounds easy right? Just announce on LinkedIn that you’ve got money to invest and the deals will come flying. Job done… Well, unless you’re a globally recognised investment firm, this is a sure-fire way to have bad opportunities enter your inbox by the boatload.

The best startups aren’t crawling LinkedIn looking for cash. They’re busy building incredible companies with ambitions to change the world. Investing is a competitive sport, driven by hype and FOMO. As soon as investors catch wind of a promising company, you best believe they’re all trying to get a piece. The process starts even before companies are “officially” raising capital. This is what makes sourcing so difficult. You, as the investor, have to spend months, or even years, searching for companies showing those signs of promise. You have to court many founders, spending time together and getting to know them, all with the goal of assessing whether they’re truly capable of achieving their very ambitious visions.

Contrary to popular belief, ideas don’t matter all that much. If there’s one thing I can guarantee in early stage company building, it’s that ideas change. And they will change again, and again, and again. This is what makes the most successful companies so great, their ability to constantly iterate on ideas at high velocity. I use the term velocity here and not speed because unlike velocity, speed has no direction and moving fast in the wrong direction is fatal. It could be easy for an investor, especially a rookie, to mistake speed for progress.

So, how do investors find these world class founders building incredible startups? Well, to quote the infamous Floyd “Money” Mayweather: “Hard work, dedication”. Sourcing requires time… a lot of time. It’s also predominantly driven by networks. The best investors are speaking with founders every day. They’re kissing a lot of frogs before they find that prince. Hundreds of frogs in fact. And it’s not just about getting on calls and listening to pitches. Relationships have to be developed, nurtured and maintained over many months. Because when the time comes, founders will know which investors put the work in to support them and which investors are there to make a quick buck.

Great investors are constantly engaging founders through LinkedIn, Twitter, over email, monthly catch ups, networking events, speaking with other investors and following business incubators and accelerators. Data-driven approaches are also becoming popular, where investors use technology and machine learning to find startups in the wild that meet certain criteria set by the investor or firm. While this makes the sourcing process exponentially more efficient, it’s expensive and certainly isn’t without its flaws. Bias being the main one. Sourcing is a relentless pursuit that isn’t for the faint of heart and could easily be a full time job. And often is. That said, for investors who put the work in, the payoff can be life changing. And if you don’t have the time to put the work in, there’s always PitchedIt 😉

What we’ve been working on at PitchedIt

In the last week we’ve been invited to pitch at a number of investor events, we’re still flat out building product and responding to Central Bank queries.

• Getting our pitch materials ready in preparation for some upcoming in-person investor pitches 🎤

• Building out the admin dashboards for our platform that will help our team ensure every project is running smoothly ⚙️

• Refactoring our investment flow after uncovering some opportunities to improve the user experience through user testing 🛠

• Lots and lots of networking 😉

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of PitchedIt. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. PitchedIt’s singular focus is to unlock private markets for Millennial and Gen Z retail investors and help them build wealth through the highest performing private market opportunities.

Scott & Rob
PitchedIt Co-Founders