Dear SaaStr: How Do VCs Find Companies To Invest In?

Q: How do VCs and investors find companies to invest in?

Later stage VCs (Series B/C/D/E, etc) have it somewhat easier — they track startups breaking out and just reach-out. They track every startup that gets funded. They track who else invests. They aggregate data on revenue and stage. They have analysts and associates follow up with every startup with traction to get more data. They subscribe to Pitchbook and CB Insights and other data sources to get more data and track. They then often outbound to every startup that seems to have something potentially good.

The harder part for later-stage investors is winning the top deals, not finding them.

With Seed and earlier, it’s tougher. Because there are so, so many startups and not enough data (and awareness). So they need more data to find the top deals.

  • Hunt: Attend events. Watch ProductHunt. Attend YC and other DemoDays.
  • Referrals: This is why so many seed investors “hunt in packs”. Referrals from other folks invest at the same time, or in the pre-seed or prior round.
  • Top-quality raw inbound. Founders just emailing them. You will hear this doesn’t work. That’s wrong. Seed and pre-seed VCs read almost every email sent to them. The very, very best opportunities stand out. And they reach right back out. More on that here.

Published on July 19, 2021

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