Optimize Your Deal Sourcing Pipeline: The Best Data to Track

Deals don’t happen overnight.

You are likely tracking thousands of targets over the course of months or years and you need a better way to quickly know information without having to spend hours deciphering call notes and email chains.

Some dealmakers call them “custom fields.” At Grata, we call them “labels.”

Labels ensure you’re not wasting precious time when you need to track down a note from a call 6+ months ago. Labels ensure that you’re capturing institutional knowledge, not making the same mistakes, and getting smarter as you look through more deals.

More importantly, labels can give you an accurate view of your deal funnel at every given point. 

There are many ways to use labels or custom fields in your day-to-day sourcing process. Let’s go over best practices.

Best Labels to Track Deal Flow

Here are some examples of how you can label deals to make the deal process smooth for you and your investment partners.

Status

The status label quickly shows where the deal is at. It helps you and your team quickly identify what stages a deal has gone through without having to shuffle through your inbox. Knowing the status in seconds instead of minutes really adds up over time.

Based on hundreds interviews and calls with dealmakers, we landed on the most commonly used deal statuses. We recommend starting with seven deal status labels: lead, reaching out, pursuing, live deal, monitoring, closed, and dead.

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Priority 

Not all deals are created equal. A priority label makes sure you can quickly filter down to high-priority deals, confirm their status and move down to medium and low priority deals. The terminology you use? Completely up to you. 

High, Medium, Low

Or 

Tier 1, Tier 2, Tier 3, etc.

‍Owner(s)

Collaboration is key. Each target needs an owner– the person who is responsible to respond to or nurture the lead. Without target owners, potential deals fall through the cracks.

It’s likely that the owner of the target will change as they move through the deal funnel. The person who conducts the initial outreach, will not be the owner who starts the due diligence process. Owners and approval processes need to be clear and flexible to change.

Oftentimes, the highest functioning teams will have two owners: (1) the business development (BD) owner who sourced the deal and (2) the investment or deal partner who will work with the company through a transaction and serve on the board if the deal goes through.

‍Reasons

You need a single place to track your reasoning behind why you advanced or passed on a deal. You’ll likely have a lengthy brief that includes your thesis and how the company fits into that thesis, but for the purpose of quick insights, you can always write a short note with more information.

While exact terminology and categorization will vary by firm, some common reasons for an stalled or terminated M&A deal are,

• Price
• Integration challenges
• Strategic fit

Outbound Strategy

It’s important to note how you are going to approach the company. What is your angle in? Is there a connection in your network currently? Are they similar to a portfolio company? Part of a roll-up? Or do you just like the space? Track those labels right when you find a company in your deal sourcing platform. Not separately. You will forget, especially if there’s a handoff during the sourcing process.

Early Diligence

This section will vary by firm, but is important to note. Are there specific things that are important to your investment mandate? If so, create a label for them. Some common qualitative data points are: strength of management team, synergies (for corporates/strategics), defensibility/moat, and product or service quality, ESG alignment.

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Need a deal sourcing platform with custom labels? Grata can help. Manage your process better with Grata. Get in touch with our team here to learn more.