Half of all VC firms don't return 1X to investors, and the average firm failed to beat the NASDAQ Composite returns of 12% over the past 20 years.

It's top quartile firms that smash market returns, generating annual returns exceeding 20%.

And they do this by reliably attracting and accessing quality deal flow.

I stress quality because all firms are inundated with bad deal flow. 

You know, the next Airbnb for dogs, or the next Elizabeth Holmes.

But if your firm is to become not only successful but enduring, then it needs to access quality deal flow, and back the next Uber, Nvidia, or Canva.

But with over 8,000 venture firms globally, and new funds being announced every week, standing out to attract quality deal flow is not easy.

That’s why I’ve prepared this article on 12 levers you can pull to help improve the quality of your deal flow, and give your firm a better chance of getting on the cap table of fund-returning companies. 

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12 Levers to Quality Deal Flow

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1. Reputation

The Sequoias and Benchmarks of the world have it. And as a result, most of their deal flow comes through referrals and warm introductions. In fact, Benchmark’s one-page website lists nothing more than a mailing address. 

But chances are that your firm is not one of these. 

As a result, you need to build reputation through your work with existing portfolio company founders, word of mouth, content, media appearances, and hopefully over time, your track record. 

2. PR

Getting into reputable tech and business publications, and appearing on the right podcasts, can help you build a presence in the market. Doing this well includes effectively crafting press releases, building relationships with PR agencies and journalists, having a unique angle or hook to get the attention of big publications, and starting small with efforts like guest post submissions to smaller independent publications that can get syndicated up the chain to the big players. 

3. Networks

Cultivating your network is a byproduct of attending industry events, hosting industry events, reaching out to people via LinkedIn and Twitter, and putting out quality content that mentions or invites contributions from fellow venture capitalists, founders, and industry figureheads.

4. Brand Visibility

Visibility transcends mere presence. Firms can actively develop content such as articles, podcasts, reports, and webinars, contribute to industry publications, share success stories through various channels - especially Twitter and LinkedIn, and engage in community-building initiatives such as events. This multifaceted approach ensures consistent brand visibility that extends beyond the confines of traditional marketing.

5. Personal Brands of Partners

Founders want to work with people they know, have a sense of familiarity with, and ultimately, believe they can trust. Venture capitalists such as Jason Calacanis, Harry Stebbings, David Sacks, Matt Turck, Andrew Chen, others who have invested a ton of time in cultivating their personal brands through creating and distributing content online, have the upper hand when it comes to getting on the cap table of high-performing emerging companies. 

6. Value-Added Services

Beyond simply investing, firms can help themselves get on the cap table of high-performing companies by providing value-added services, be it marketing, software development, training, recruitment, advisory, referrals, and more. 

But founders need to know about these services, and how they’ve impacted other companies in the past. If a founder is aware of the value add, but also believes that it will make a material difference, it can go a long way in getting their signature. 

7. Track Record

A track record speaks volumes. If your firm has a good strike rate of backing and helping get portfolio  companies to, say, $100M+ revenue, and delivering solid returns to investors in the 20% IRR+ range, then founders will be compelled to learn more. 

This, again, needs to be communicated.

And if you haven’t developed that track record yet, you need to rely on the other eleven levers to help generate it over time. 

8. Geographic or Sector Focus

Venture is super competitive in 2023. That’s why niching down, a prudent strategy for companies in general, is advised. If you’re investing only in companies in, say, the balkans, then you’re more likely to build a reputation within this small southeastern European market, than if you had a global mandate.

Similarly, if you only invested in a niche sector such as agritech, then again, you’ll have a much easier time not only getting noticed in your target market, but actually being able to truly move the needle for companies by virtue of spending all of your time learning and working in just one sector.

Bonus points if you niche down on both a geography and a sector - something that will only work if the market and potential talent pool is deep enough. Niching down on biotech startups from the Republic of Macedonia probably isn’t going to be a very good idea. =) 

9. Strategic Partnerships

Cultivating relationships with other venture capital firms, to help share deal flow, networks, mentorship, and resources, can go a long way to getting access to quality deal flow. 

So too can crafting relationships with third-party service providers. 

For example, many an accelerator programs has developed relationships with the likes of AWS and Hubspot to give their cohorts of startups cloud credits and digital marketing tools that they would otherwise have to pay for.  

10. Expertise

If you’ve been in the game for over a decade, and explicitly focused on, say, SaaS, then you’ve no doubt developed a lot of experience and expertise over time - something that can help your portfolio startups succeed.

But the market needs to know.

So unless you’re putting out compelling content - such as podcasts, videos, articles, case studies, reports, and so on - then all of your expertise is likely to be for naught in terms of attracting quality deal flow. 

11. Firm Brand

Unlike the personal brand of partners, which can be cultivated through podcast appearances and content, the firm’s brand is something that reflects all of its public-facing touchpoints at large - website, events, media appearances, mentions, word of mouth, logo and brand assets, track record, and so on.

Cultivating a strong brand is something that takes time, requires all of these levers to work in tandem, and ultimately can come apart with just one questionable move, as Benchmark’s Bill Gurley discovered when it led the coup to remove Travis Kalanick from UBER. The move forced would-be portfolio company founders to reconsider working with Benchmark whose founder friendliness was now in question. 

12. Founder-Friendly Approach

Founder friendliness is a term that traces its origins to Peter Thiel’s Founders Fund. Up until the early 2000s it was customary for founders to be replaced by corporate CEOs, but the likes of Thiel an Musk changed this at the outset of the new millennium with their work at PayPal.

Nowadays, founders want to know that it is not their board or their VCs that will be in the driving seat, but the they themselves. Founders want support, empathy, and a partner in what is a Herculean long term and often perilous journey, not a boss.