Insights
Deal Sourcing

How Verus Ventures improves coverage by 75%

26 Dec 2024
•
10 min read
Stop contacting the same companies as everyone else in your market by relying on traditional mechanisms such as industry classifications, keyword searches, or AI recommendations.

Our custom sourcing solutions scan terabytes of information and fine-tune your search with a multi-dimensional search algorithm, Generative AI, and proprietary datapoints to deliver outlier results.
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Outbound sourcing is something that's near (but perhaps not so very dear) to the hearts of every investor.

On your quest to find relevant acquisition targets, you've likely nurtured relationships for many years, attended every industry conference, participated in dozens of auctions with all your competitors, purchased a myriad of data products, and hired offshore teams to manually scan the internet.​

We've laid out these sourcing methodologies in the below framework.

While all of these methods have their merits (and most should still have a place in your overall deal sourcing strategy), we noticed that once a market got too competitive, or an investor wanted to scale up from several deals a year, most of the items in the table no longer gave them a cost effective way to support their growth.

Method
Volume
% Success
Cost
Time
Competition
Scalablility
Personal Connections
Low
High
Low - High
High
Low
Low
Broker Relationships
Low
Medium
High
Low
High
Medium
Events or Conferences
Low
Low
High
High
Medium
Low
Social Media
Low
Low - Medium
Low
High
Low
Medium
Deal Marketplace
Medium
Medium
High
Low
High
Low
Data Products
High
Low
Medium
Medium
High
Medium
Manual Search
Medium
Low
Low
High
High
Low
Custom Lead Engine
High
Medium
Medium
Low
Low
High
The problem with data-driven sourcing

Data-driven sourcing is a numbers game that focuses on attaining a large volume of leads with an expected low probability per lead. This can be done through a combination of basic Google Search, niche directories such as review sites, and traditional data products.

Data-driven sourcing looks fantastic on paper:

  • $20K for a data product per year
  • $10K-15K for an offshore resource per year
  • 10K relevant leads mined per resource per year (optimistic)

Even with a yearly lead to close of 0.01% that's 1 deal a year per resource or $35K per deal. With 5 offshore resources, that's 5 deals a year at $19K a deal.

And the math can look magnitudes better depending on how much you choose to play with the numbers.

The one major red flag with data-driven sourcing is that all your competitors can replicate your strategy if you look for the easiest solution.

In particular:

  • All your competitors will buy the same data products.
  • Everyone will find the easiest 50% of companies from each data product by utilizing industry filters, simple keyword search, or AI recommendations.
  • Everyone contacts the same companies and increases the probability that the seller will hire a sell-side broker to manage the process.
  • Low-cost resources mean you fill your database with a lot of junk (either irrelevant or out of business companies).
  • Anything proprietary that you do find, you will upload it to the data product by way of a CRM sync/integration and expose it to all of your competitors unless a strict no data-sharing agreement is in place.


Not so great now eh.

That doesn't mean data-driven sourcing can't be successful - it just needs to be done in a thoughtful, proprietary, and custom way.

Our proprietary lead engines:

  • Are built off a database of over 30M active companies to ensure you capture the entire market - not just the easiest 50%
  • Leverage cutting-edge technology such as proprietary classification algorithms and Generative AI
  • Can be tuned to your precise investment mandate
  • Include lead quality testing, mandate verification, and lead scoring
  • Set you up for success.