An effective investment network is crucial for investors to get access to high-quality deal flows and expertise. However, building a solid investment network requires thoughtful planning and consistent effort. This article will explore various strategies investors can adopt to build their priority investment network.
With the proliferation of investment opportunities and players, having a robust network of relationships has become indispensable in the investment industry. Whether you are a VC looking for promising startups or a PE investor searching for undervalued companies, leveraging your connections and networks is key to sourcing great deals. In addition, tapping into your network helps validate assumptions, gather insights and experiences, and identify co-investment partners. Therefore, cultivating an investment network should be a priority for investors.
When mapping out your investment network strategy, it is important to identify the right people and institutions to connect with. Your priority network should include founders, experienced investors, advisors, limited partners, bankers, lawyers, and accountants. Expanding your network horizontally across sectors and vertically within a sector is crucial. Make sure to include both established players as well as emerging talent in your network. Geographical diversity also matters since interesting opportunities can arise anywhere.
Simply expanding your connections is not enough. You need to nurture relationships proactively and consistently. Set up regular one-on-one meetings and small group discussions to foster deeper engagement. Contribute value by sharing insights, making introductions, and helping others before asking for anything in return. Genuine relationships based on trust and reciprocity are the foundation of a fruitful investment network.
Leverage digital tools to identify and connect with the right people
The investment community has expanded enormously, making it challenging to identify and connect with relevant players, especially those outside immediate circles. This is where digital tools can help streamline network building.
Investor databases like PitchBook, Crunchbase and CB Insights are invaluable resources to identify VC/PE firms, startups and seasoned entrepreneurs in any sector or location. Professional social networks like LinkedIn enable connecting with the desired professionals directly. Look beyond immediate connections and proactively reach out to 2nd & 3rd degree connections.
Many investors host demo days and investor meetups, which serve as great opportunities to expand your network. Sign up for newsletters and event invitations from accelerators/incubators and startup ecosystems to get invites. Don’t spread yourself too thin by having superficial conversations at events. Focus on forging 3-4 meaningful connections. Follow up to strengthen relationships.
Social media is also a powerful tool for network expansion and engagement. Follow relevant people and firms to gainvisibility. Provide thoughtful comments on their posts. Share articles and insights relevant to their interests. Tools like Twitter lists and LinkedIn Groups help you organize relationships and conversations.
Build relationships with potential co-investors
Finding like-minded co-investors you can partner with on deals can give you an edge in competitive situations. It provides access to shared expertise and the ability to write bigger checks. Make sure to include specialists in different domains, VCs at various growth stages, and investors with complementary geographic/sector focuses in your network.
Approach potential co-investors you have identified and initiate a candid discussion on investment theses, current focus areas, and philosophy. Share deals you are currently evaluating and get their perspective. Brainstorm ideas and see if any specific opportunities for collaboration come up.
Also, leverage experiences of past co-investments to strengthen future partnerships. Reflect on what worked well and what could be improved. Institutionalising processes around deal sourcing, due diligence and post-investment value-add will help streamline future co-investing activity. Invest time upfront to build relationships based on trust.
Maintain loose ties with co-investors even when there are no active deals discussions ongoing. Share interesting insights and new learnings. Look out for opportunities to help each other, whether investment-related or not. These small gestures over time strengthen interpersonal bonds and partnership readiness.
Engage with subject matter experts and advisors
While investors bring capital and strategic support, subject matter experts and advisors can share deep domain knowledge and operating expertise. Identify and get acquainted with seasoned executives, successful founders, academics, and specialists.
Tap domain experts to validate assumptions around market opportunities, technology trends, competitive landscape, and team capabilities during the evaluation process. Discussions with them will bring an additional perspective and help assess deal potential and risks better.
Advisors can guide portfolio companies on strategic, operational, recruitment, fundraising and even founder-mentoring matters post-investment. Maintain a roster of trusted advisors across different domains that portfolio companies can be directed to, as relevant. Offer to make connections to the experts already part of your network.
Also, keep former portfolio executives handy as their operating experience can benefit new portfolio companies in their respective domains. They may even be willing to take up formal advisory roles. Make sure to stay engaged with them even after their formal commitment ends.
Building a personal rapport and keeping interactions casual and interest-driven initially helps establish comfort. Over time, the relationship transitions to trusted advisor. Keep discussions two-way rather than one-sided asks.
Forge connections with bankers, lawyers and accountants
In addition to investors and industry experts, forging ties with professional services providers like bankers, lawyers and accountants is also vital.
Bankers are invaluable when portfolios need debt financing, M&A advisory or other banking services. Maintain an open channel of communication even when there are no immediate mandates. Share ideas on how they can adapt existing products/services to cater to the changing needs of the startup/VC/PE sector.
Experienced lawyers specializing in venture capital and private equity financing, investments, mergers and exits are a must-have network connection. Engage them even during deal evaluation to assess potential risks. Update on interesting deals even if you eventually decide to pass. They will come handy when you need specialized legal counsel.
Chartered accountants will be critical for portfolio bookkeeping, financial reporting, taxation planning and filing, audits and valuations. Identify and empanel CAs experienced in working with startups/PE portfolio companies. Engage periodically to educate them on emerging developments in the ecosystem.
In the investment world, the strength of your network determines the quality of opportunities you can access. Investors should make building their priority network a constant endeavor spanning different domains and geographies. The focus should be on forging genuine connections that go beyond superficial interactions. Nurturing relationships proactively and consistently over time will ensure your investment network delivers access to the best deal flows and expertise when needed.