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Deal sourcing guide: Find the right investment opportunities

Learn how you can use PitchBook to inform your investment strategy, find companies in your target sector that are primed for funding or acquisition and accurately gauge a company’s growth.

In today’s evolving investment landscape, sourcing high-yield opportunities ahead of the competition is crucial to long-term success. To identify the right deals, investors must engage in proactive outreach, know the ins and outs of their industry, and navigate a web of nuanced opportunities.

Whether you work for a venture capital firm or private equity group or are looking to close an M&A deal, our guide to deal sourcing has you covered. We’ll detail PitchBook’s best practices for finding promising investment and acquisition opportunities.

Before exploring our best practices guide, let’s take a closer look at what deal sourcing means for investors in the private markets.

What is deal sourcing?

Deal sourcing is the strategic approach private equity groups, venture capital firms, investment banks, and corporate teams use to identify and secure lucrative investments. Finding large volumes of potential opportunities at any given time involves in-depth market intelligence, connecting with the right stakeholders, and evaluating opportunities that align with your firm’s goals. Private market participants conduct rigorous financial and nonfinancial analyses to find targets to set them apart from the competition, diversify their portfolios, and optimize returns.

Enhance PE and VC deal sourcing with data-driven insights

While dry powder levels are at an all-time high, access to capital has become increasingly limited. Firms looking to make new investments must safeguard current holdings to weather regulations and market changes. Investors must remain agile in dealmaking and fundraising to find new ways of enhancing their deal-sourcing strategy.

The best firms understand that a data-driven approach is critical to sourcing the right opportunities. That’s because timely, accurate financial data helps substantiate claims, focus research, and drive efficiency.

Our guide looks at how to use market data to empower your investment strategy, discover companies in your target sector primed for funding or acquisition, and correctly gauge a company’s growth.

What does our deal sourcing guide offer?

How to inform your investment strategy with private market intelligence by:

  • Conducting detailed market analysis
  • Identifying macro trends
  • Researching exit activity of sponsor-backed companies
  • Comparing companies in niche fields
  • Discovering and tracking emerging spaces

How to identify investment targets that align with your strategy by:

  • Creating a target list
  • Searching for companies ready for funding or acquisition
  • Easily connecting with your targets

Frequently asked deal-sourcing questions

How do you start deal sourcing?

Deal sourcing always begins with research performed by an investor’s team or outside contractors to identify potential prospects. From there, the investor or corporate team must decide whether to use traditional, network-based deal-sourcing strategies or rely on a more contemporary strategy based on online platforms.

What is deal sourcing in venture capital?

Venture capitalists often replenish their deal pipeline through research, professional networks, and referrals. In a venture capital deal, a VC firm will allocate funds they have raised from LPs to an emerging company in exchange for equity. Once the company succeeds, the VC firm will sell its share for a profit.

Unlike private equity firms, which invest in mature companies, venture capitalists look for high-growth companies in the early stages. They build relationships within the startup and entrepreneurial communities and may receive referrals from angel investors or other venture capital firms. Like PE firms, VC firms have dedicated teams that source and actively seek opportunities through prospecting. A key difference is that PE often sources deals through intermediaries such as investment banks and advisors.

How do VCs perform research?

VC firms invest in more nascent companies compared to their private equity counterparts. It is crucial that they thoroughly consider every aspect of their prospective company. VC research, the starting point of any diligence strategy, often involves researching company founders within your industry and specific market. VC investors may attend demo days or pitch competitions that help them connect with promising startups and founders alongside conducting thorough data intelligence.

Market research and analytics is a huge component of gathering and analyzing trends and getting to know the market landscape. PitchBook’s market mapping provides data-segmented maps informed by our powerful data intelligence and analyst-led research—helping you identify potentially disruptive emerging technologies.

How do growth equity firms source deals?

Growth equity firms offer strategic support to large enterprises with the potential for rapid growth. Unlike traditional private equity firms, which aim to restructure a business through leveraged buyouts, growth equity firms often have a minority stake and target companies with a proven track record to help expand their operations and acquisitions.

These firms employ a variety of tactics to source deals. Most importantly, they need industry knowledge to identify new opportunities and niche areas on the rise. Besides gathering bespoke investment data, they collaborate with industry professionals and other intermediaries, tap target companies for referrals, and work closely with investment banks.

How does private equity deal sourcing work?

To streamline their deal pipeline, PE firms are increasingly turning to platform-based market intelligence solutions, research, and outreach. PE firms improve and manage deal flow by relying on their team, contracted professionals, or data intelligence platforms. From there, they tap their network or third-party service to conduct additional research, diligence, and outreach to set the stage for deal execution.

What is M&A deal sourcing?

M&A deal sourcing is the process by which companies or firms look for investment opportunities that enhance their market share, IP, and product. M&A practitioners work with various finance professionals and rely on institutions such as investment banks to identify an investment’s viability. M&A opportunities help investors reach multiple financial and strategic goals, from diversifying holdings to gaining footholds across specific industries and geographies.

More about the PitchBook deal sourcing guide:

Why trust what we have to say?

We’ve been tracking the private markets for over a decade and have investment data on more than 3 million private companies. We offer up-to-date and accurate data on pre- and post-money valuations, industry, total capital raised, revenue figures, and other non-financial metrics that help you quickly build a list of promising opportunities and maintain your investment pipeline.

Layered on top of our dataset is an advanced search tool allowing users to search and filter companies to find investment options that fit their strategy. We designed it to make deal origination more accessible for investment professionals across the board. Many of our clients have found success by proactively sourcing investments with PitchBook.

Why should market analysis help inform a future investment?

Private market intelligence and insights are the best way to identify up-and-coming sectors and see where capital is flowing. Knowing where companies sit in the broader market context is also helpful when allocating capital. With a summary of the landscape, you can better track trends at a glance, anticipate shifts, and even see where your competition is moving.

How can I understand a newer market that has less research available?

Identifying new VC trends in their nascency before competitors can be challenging. Our guide details how to source VC deals, but we recommend diving into PitchBook’s Emerging Spaces. We are tracking more than 125 spaces that are on the rise but are not yet established enough to be considered verticals in the market. Examples include clean meat, carbon capture, air taxis, nanomedicine, and medical robots. Discovering niche corners of the markets and potential investment opportunities should be easier, and that’s exactly why we started tracking these areas.

Will the guide help me create a list of potential investment opportunities?

Yes. Learning how to create a target list is the main focus of our guide. We’ll help you quickly create a list of promising investment or acquisition targets based on the attributes that matter most to you or your client—including industry, location, pre- and post-money valuations, total capital raised, revenue figures, and more. This could include identifying all the mobility tech companies in California with Series B funding, for example, or listing all the PE-backed fintech companies in Europe nearing their holding period.

What is PitchBook’s VC Exit Predictor?

PitchBook’s VC Exit Predictor is a machine learning algorithm that predicts a venture-backed company’s likelihood of exiting using classification models to predict the probability of acquisition, IPO, or no exit event.

The Opportunity Score uses these predictions and historical average returns to calculate an estimated IRR, shown as a percentile. To qualify for the VC Exit Predictor, a company must have received at least two rounds of venture financing deals, with at least one deal occurring within the last six years. The algorithm uses data points such as deal activity, active investors, company performance indicators, and market positioning to generate exit predictions.

Access an even deeper level of exit forecast transparency with our Prediction Drivers feature. A unique waterfall chart demonstrates how insights from each exit modeling framework, including Investor Track Record, Number of Investors, and Patents, influence outcomes.

How can I tell if a company needs funding?

Our guide provides details on searching for companies ready for funding or acquisition. There are several key figures, such as the last funding date, employee count, and more, that we look to as early signals that a company is likely to need an infusion of capital or debt. In the case of M&A deal sourcing, you can leverage insight into VC or PE portfolios to see when a company is nearing the end of a holding period.

How do I figure out who to reach out to about an investment?

Once you’ve established your list of promising investment options, the best next step is reaching out to each organization as quickly as possible. Like every data point, each second counts regarding deal execution. Our platform includes easy-to-find company profiles, including management and executive teams, so that you can reach out to the right stakeholders at the right time. Competing firms may be eyeing the same investment, so getting an edge on contact information may be the advantage that you need.

How do PitchBook tools support deal sourcing?

  • Easily identify investment professionals and key stakeholders with our investor and company profiles. Gather information on active investors and companies in your area of focus, their portfolio companies, and more.
  • Get industry-defining market news and analysis on trends, regulatory changes, and specific PE and VC sectors.
  • From creating a target list of companies to connecting with top firms, our platform’s customizable alerts help you keep tabs on specific investment criteria and industry developments.
  • Enhanced fundraising, debt, and equity datasets help you see key financing events on public and private company profiles.

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