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Nov. 19, 2020

How investors source their deals

How investors source their deals

How five investors source their deals, by Luis Bravo.


Jasmine Yu Zhang, Venture University and Angel Investor:

Jasmine Yu Zhang is a partner at Venture University. According to its LinkedIn, Venture University is  “the world's leading investor accelerator for individuals breaking into venture capital, private equity, and angel investing. ... Venture University accepts <2% of the applications it receives, making it more competitive to get into than the top Ivy League schools and MBA programs.” Venture University’s team of thirty five investors,  source about five hundred to a thousand deals each quarter.  They find the deal, present it at a partner meeting and if they get approval , they move on to the due diligence phase.  From there they present it to an investor committee and if the committee approves it they will do a reverse demo to all the investors. Jasmine and Venture University find deals through their networks. For example, they find deals through incubators and accelerators they work with. She personally attends about 1-2 incubator/accelerator pitches a week. Jasmine is also an angel investor and sources her angel investing deals in a similar fashion. For instance, she states that she acquires most of her deals through her friends and professional connections. Furthermore, she also attends pitch competitions and occasionally cold calls founders. She likes to find good deals at an early stage so she could grow with the founders. Moreover, she invests in companies and business sectors she understands. Jasmine will not invest in businesses or sectors she does not understand unless she had people with the technical expertise and experience to help her validate the deal. When investing Jasmine focuses on companies that “have a very good commercial traction and also really solid technology solution or, you know, unique value proposition”, as well as “a large amount of investor willing to invest that company.”

 

Steve Shwartz, co-founder of Device 42 and Angel Investor:

Steve Shwartz is a serial entrepreneur, author, and investor. He was a founder or co-founder of three companies in the artificial intelligence area. Most recently, he co-founded the software company device 42, which is an asset management solution that allows IT admins to track hardware, software, devices and networks. Moreover, Steve is an angel investor at New York Angels, SPS Ventures and the Angel investment Forum. A hundred percent of his deal sourcing stems from the angel investing groups he is a part of. However, when he had more time he would attend meetups or presentations. Steve evaluates a prospective investor by asking how does the product address the market need?, what is the technology and is it done?,  and is the company showing growth?. Some red flags for Steve are if the founders come in with an inordinate and unreasonable valuation, when they don’t state the true number of competitors they have, and when they don’t explain how they are going to allocate his funds, specifically he wants to know where this round of financing will take the company.

 


Kristina Francis Principal at the Marathon Fund and a member of Pipeline Angels: 


Kristina Francis  is a  Principal with the Marathon Fund and a member of Pipeline Angels.  According to Kristina the Marathon Fund is “a private growth fund that invests in pre-seed, seed, and pre-Series A stage companies majority-owned and/or controlled by underrepresented entrepreneurs.” While, Pipeline Angels is a program that helps underrepresented entrepreneurs get funding and support. Moreover, it also helps underrepresented groups learn about angel investing. Kristina sources her deals from the Pipeline Angels and Marathon Fund pitching events. Additionally, she finds deals through referrals from other angel investing groups that work with Pipeline Angels and the Marathon Fund. Furthermore, Kristina also gets referred deals from entrepreneurs who successfully went through the Pipeline Angels program. When Kristina is looking at investment she likes to know the origin of the business and why it started. She would also be more inclined to invest if the entrepreneurs know their numbers cold. Specifically, she would like to make sure that the entrepreneurs know their customer acquisition cost. Currently, Kristina is looking for entrepreneurs who know how COVID-19 is affecting their business and have a plan to pivot and not just survive, but thrive during this crisis.

 

Christian Pankovcin,  financial analyst at 13 Ventures :

Christian Pankovcin is a recent finance graduate of Fordham University. He used to work for NY Angels, which is a seed funding angel organization. Specifically, it is a consortium of wealthy individuals that invest in companies together. At NY Angels, Christian was an associate analyst that helped screened start ups. And is now a financial analyst at 13 Ventures. According to their website 13 Ventures bills itself as a venture capital firm that “aims to propel smart and mighty companies, with daring, proven ideas through each stage — from growth through exit.” At 13 Ventures Christian primarily reaches out to founders, reviews, business plans, and pitches, financial forecasting, and researches different industries. He conducts due diligence on startups by first Googling them, then he checks their website, then he checks their business plans and financial statements. Christian and 13 Ventures get the majority of their deals from entrepreneurs that apply to be funded on their website. Moreover, they also source their deals from networking and professional connections. In fact, he states that getting an investment from them is easier if you know or have worked with someone at 13 Ventures.  They also inquire and look at interesting companies they see in publications and social media sites like LinkedIn. 13 Ventures is industry agnostic in investing, but Christian believes the focus of 13 Ventures is in much heavier consumer products.  But, they also consider tech investments that revolve around innovating consumer products. 13 Ventures is interested in companies with high revenue. Specifically, revenue in the hundreds of thousands to the millions.

 

Mitzi Krockover, managing director, Co-Chair of the Health Sector Committee and the Founding Member of Golden Seeds' Arizona chapter:

Mitzi Krockover is the managing director, Co-Chair of the Health Sector Committee and the Founding Member of Golden Seeds' Arizona chapter. Mitzi was previously an internist and the former founding director of the Iris Cantor UCLA Women's Health Center. She was also the former Vice President of women’s health at Humana. She joined Golden Seeds to invest In women’s startups as an angel investor. She invests in much more than women’s startups, but her motivation to join Golden Seeds was to invest in women run startups. Mitzi specifically focuses on health and health science startups. Golden Seeds has about 300 members and 8 chapters across the country. Golden Seeds not only provides investment, they also leverage their networks to help companies with things such as, customer growth and guidance and mentorship. She sources her deals, through people applying to and contacting her Golden Seeds Chapter for investment. Moreover, she also gets deals if someone from her network refers her to an entrepreneur. When Mitzi is looking at investment she wants to know what the problem is, what the solution is , if they really looked at the market and competition, and how the company is going to make money.  Unlike many other investors, she wants to know what the exit strategy is. 

 


In essence, most investors source their deals from their venture capital firms or angel investing groups and from their professional connections and networks. It is possible, that you could send them a message on LinkedIn out of the blue and still get an investment, but it is unlikely.