Ed Marsh, author of this article, is a member of ACG and a NACD Governance Fellow.
Sourcing Deals & Growing Businesses
“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” — Sun Tzu, The Art of War
Raising a Fund - Sourcing Deals - Successfully Closing Transactions - Growing Portfolio Companies
Successful private equity investing is complex. It's an endurance event in which each phase is challenging.
In a world of relative core parity (smart, well educated people with practical experience) difference in performance is often unique insight.
"Additionally, the space has become incredibly crowded with intense competitors, which has to make it harder to produce high returns as the alpha is competed away. If every team in the league is the Golden State Warriors, then no team is the Golden State Warriors. People have trouble coming to grips this concept, that absolute skill level is not the problem, it’s a relative skill level game." 'Downtown' Josh Brown
It's time to add another differentiator - deal intelligence.
Buyer Intent Data (as we'll explore below it could also be called Seller Intent Data) can help firms win before going to war.
Right Time, Right Place
There's a lot of business built on referrals. Not only does a strong referral from a highly regarded source carry an important imprimatur of trust, it's also particularly powerful because it often results from a timely conversation. "I'm thinking about cashing out of my business. How did you go about doing that?" for instance. Whether as a favor to a friend from the country club, or out of selfish business interest as deal maker contacts likely investors, there's an implicit intent.
Those are relatively rare, at least compared to what most firms need to meet growth goals. And so the alternatives for deal sourcing involve a huge amount of waste. Filtering through thousands of potential targets to find a couple who might be in the right phase of their thinking is a task easily handed to associates and interns - but wasteful nevertheless.
But what if you had the timely indicator of a referral, based on internet wide activity?
How would your deal sourcing be different if you started with a list of companies considering some sort of liquidity event? It's pretty tough to talk someone into selling or recapitalizing when they're not ready - no matter how compelling and logical your arguments. It's too emotional.
But once they've crossed that Rubicon, don't you want the chance to talk first?
Seller Intent Data
It's common for companies to work on improving their own digital properties to attract potential investors and targets. The problem is that even when digital is done really well (with content in support of thought leadership to attract traffic, convert it to known contacts and nurture those toward action) it only impacts a small percentage of the potential. (For instance, of business owners looking for information on how recapitalization might work for them, a strong digital presence might rank 2 or 3 for relevant searches; achieve click-through-rates of 25-30% to actually get folks to their site; and then convert someone to a lead at a rate of 3-5%. That means of the business owners searching for this sort of help, somewhere between .75-1.5% may actually become leads for a firm to nurture. The obvious implication is that 98.5-99.25% are unknown.)
Maybe your associate happens to get the right person on the phone randomly dialing, or maybe you happen to connect with an attorney at an industry networking event who introduces you...or maybe not!
We all know we're tracked online. Most of us don't realize the extent - and the opportunity that represents.
It's now possible to track who's taking actions everywhere else on the internet - an enormous universe beyond your own site.
You set parameters (size of business, title of person, geography, types of information they're searching and interacting with, competitors, target accounts, industry influencers, etc.) and receive a weekly report of everyone who meets those criteria - first & last name, company, email, phone, and a variety of details on exactly what they did.
Imagine what this means to your deal sourcing! Sure, you still have to make contact and establish yourself as a trusted resource - but you're focusing resources on likely transactions.
Additional Use Cases
Identifying potential targets is only the first application of this technology. Additionally it can:
- generate deal intelligence - wondering who else is sniffing around your targets, or whether principals in your targets are looking at other investors? It's likely that you'll uncover some of that information too. How would you adjust your negotiation strategy with those insights?
- support due diligence - is the market opportunity really what you understand it to be? How much substantive opportunity is there? How are competitors faring? Is the target's marketing and sales focused properly or is there an opportunity to unlock more rapid growth with some basic blocking and tackling?
- fuel portfolio growth - I've learned that most investors love to be able to push helpful resources out to their portfolio companies but hesitate to dictate much of the strategy or any of the tactics. They need management to own the outcomes. Buyer intent data fits perfectly in the sweet spot. It provides a competitive advantage which management can execute on according to their preferred approach. In this use case VPs of Sales and Marketing use the data to create a list of qualified, sales ready leads for active engagement. Simultaneously it provides high octane boosts for common B2B marketing approaches including lead nurturing, account based marketing, custom audiences for social media ads and competitive deal intelligence.
Win First and Then Join the Battle
You compete against the status quo and deeply emotional perspectives of potential fund investors and business owners. And you compete against brilliant, analytical and incredibly hard working firms looking for the same sweet deals. Finally, your investments compete in their industries for organic growth.
One of the biggest challenges is information parity - when everyone has access to the same info, only your ideas and insights make the difference. Those insights may be enough sometimes, but why stop there?
You've got an opportunity now to reestablish information superiority!
Buyer/Seller Intent Data is the key.
Let's talk about giving your firm the intent data edge