One of the most discussed things in venture capital is the question of sourcing. Where do investors find the best companies? What’s the best way to get something in front of an investor you want to approach? Which channels or paths actually work?
In an attempt to answer these questions based on the companies that we decided to fund, I spent some time looking at how we actually found our first pool of investments at Precursor and thinking about what that says about the channels that actually work best for us.
We have been very busy at Precursor and made our 80th investment in late 2017. We try to cultivate an open, approachable style here at Precursor and we often invest in founders who are not well known to us at the time that we choose to invest. And, as one of my colleagues pointed out, even two people on the team here at Precursor were not well known to me before they joined us:
Classifying sourcing channels is particularly difficult. For example, I have people in my network who are entrepreneurs, college classmates and angel investors all at the same time. How do you classify such a person? I’ve tried to think of the context in which the introduction was made when assigning sourcing attribution, but I’ll admit that the data could be cut in different ways and yield slightly different conclusions. I think that’s important context to keep in mind if you have questions about the data.
I’ll leave it to the reader to draw conclusions from the data above, but a few things stood out to me looking back on the companies that made it into the Fund I portfolio.
For those of you who are thinking about how to get in touch with us, I hope this short post gives you some insights on the many ways you can get to us and get a serious look.
For those of you who want more detail on what the categories mean, I’ve provided some descriptions below.
To simplify analysis, here’s a summary of what each of the categories in the bar chart represents.
Accelerator: Any program like YC, Techstars, 500 Startups, etc.
Angel Investor: Someone who regularly invests in startups but doesn’t do it as a primary occupation.
Co-Investor: An existing investor in the company who sent it to us to participate in the same round.
Direct Outreach: This is not a catch-all for cold outreach. This category captures founders who reached out to us directly and not through any intermediary channel.
Fund I LP: Any company that was referred to me by a Fund I LP where my primary relationship with that person is as an investor in Precursor Fund I.
Late Stage VC: Anyone who invests later than Series B as their primary entry point.
Non-Portfolio Founder: Any founder or entrepreneur I know but have not backed through Precursor, SoftTech or in my personal angel portfolio.
Personal Connection: This is a catch-all bucket for people who I know professionally or personally but do not fit into any other bucket listed on the chart.
Portfolio Founder: Covers any person who was a Founder at Precursor Fund I company at the time I made the investment.
Previously Backed Founder: Refers to anyone who I had backed at SoftTech, In-Q-Tel or through my own angel portfolio.
Seed Investor: All referrals from existing investors at institutional seed firms.
Series A Investor: All referrals from investors whose primary entry point is Series A.
Service Provider: This bucket covers banking partners, accountants, lawyers, and other firms that provide valuable services to startup companies.
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