Recently, I met with the principal of a multifamily office who for the past couple of years had begun making direct private venture investments in early-stage companies on behalf of his clients. The benefits to his practice were quickly realized. The open posture that his practice assumed toward venture investment opportunities increased his firm’s visibility within the entrepreneurial, business and high-net-worth communities, which in turn has created many new client opportunities.
However, once you hang out a shingle as an investor or potential capital resource for early-stage companies, you will likely find your inbox besieged with unsolicited invitations, executive summaries, business plans and PowerPoint “decks.” My friend was seeking counsel on how to best develop a process to organize the inquiries he was receiving.
Advisors should take control of deal flow by establishing and adhering to their own rules of engagement by which they receive, consider and evaluate private opportunities.
To begin with, when an entrepreneur or issuer solicits you to consider a startup or early-stage company seeking financing, you must avoid the “send me something and I’ll take a look at it” approach. This should be your first rule of managing deal flow—don’t open up your inbox to random solicitations that have not had some preliminary vetting, as that email will invariably be the first of many more (unwanted) emails to come. To the contrary, establish the protocol that your inbox should only receive invited deal flow.
All the “send me something I’ll take a look at it” approach does is fill up your inbox with emails to which proper business etiquette and professional consideration obligates you to respond. As an alternative, I prefer to give an entrepreneur, issuer or promoter five minutes—right here, right now—to pitch his venture or idea. I find this approach to be an efficient use of my time, respectful to the entrepreneur, effective as a preliminary screening protocol and a great way to act as gatekeeper for my inbox.
Furthermore, the “send me something” approach is counterproductive for all parties concerned. Rather than receiving an email intro to a new business venture, I prefer having the initial opportunity to engage directly with an entrepreneur to hear his impromptu elevator pitch. It is an excellent chance to assess the clarity of the business idea and vision, the interpersonal and communication skills of the founder, as well as the passion and commitment that he brings to the table.