9 Key Elements of Deal Flow Management Software

Every early stage investor strives to have a full pipeline of startups in which to invest. But how do they manage all the dates and details of each prospect and ensure nothing slips through the cracks while determining if a deal is right for them? Organization tools, of course! Here’s our guide to what you should look for in a professional deal flow management system designed for venture funds, angel groups, family offices, and other early stage investment organizations to streamline their pipeline management process.

This summary is meant as a follow-on to our article about the 4 Key Benefits of Active Deal Flow Management, where we highlight the importance of having a centralized and organized deal flow process that is collaborative, structured and returns-focused. Here we’ll emphasize the key components to look for in a deal flow management platform. This outline can be useful for tracking venture capital deal flow and angel group deal flow, as well as deal flow for other investment organizations seeking to efficiently manage their pipeline of early stage investment opportunities. 

Streamline Deal Flow Management

Active investors have new deals coming in, deals under review, prospects pitching, companies in due diligence and deals they’d like to revisit down the road. You know the sequential steps deals take as they move through your pipeline. But, how do you minimize busy work so you can focus on deal evaluation while still being able to keep track of where each deal is at any point in time? How does your deal team know the latest status and next steps?

Having an established and centralized system in place will make it easier for you to bring investment opportunities into your pipeline and seamlessly funnel them through the stages of your deal flow so you can select the best opportunities for your investment portfolio.

Key Features & Benefits of Deal Flow Management Software

Your deal flow management software should have the following 9 key features and benefits to ensure that you can easily capture information and stay on top of each step of your deal flow process. 

1. Customize Deal Flow Processes

Deal flow tools for funds and investment groups come in different shapes and sizes. At the core, you’ll want to have a high degree of customization available to tailor the software to match the needs of your own deal flow process rather than requiring you to change how you track and manage your startup investment opportunities. Although any system should provide a solid set of smart defaults, the deal flow tools should be adaptable to fit your investing thesis and any pre-established process you may already have in place. 

2. Collaborate on Deal Flow Tasks

Your deal flow solution should enable you to assign administrative privileges or view-only access to your partners, deal team, investment committee or investment group members so they can help. It should also allow you to download PDF summaries of each prospect to share with key stakeholders. Get your deal team involved early so they can scout deals and be on the lookout for interesting opportunities. Enable them to view prospects in your pipeline and to participate in the evaluation process leading up to a decision to invest or pass. Many eyes, ears and perspectives are beneficial, while additional hands help to lighten the load! 

For venture funds, your deal flow software should allow you to share access with the fund manager, deal flow manager, investment team, advisors, and others working with the fund to source and evaluate opportunities. Those individuals should also be able to see your fund’s current holdings and performance metrics in order to determine how a prospect investment may fit within the overall portfolio. For angel groups or other investment organizations that invest through Special Purpose Vehicles (SPVs) or directly into companies, your deal flow system should allow for collaboration across many individual investors so they can become actively involved in the deal flow process and evaluate prospects that may fit well within their individual portfolio of investments.

3. Track Deal Flow Sources

Most investors source deals directly by networking within the entrepreneurial community. Many also have deal flow brought to them through referrals while others may have entrepreneurs reach out to them directly. Managing the “who and where” of your deal flow sourcing is important so you can continue to keep those sources and lines of communication open and clear to bring in new leads. Your deal flow solution should enable you to track your sources of deal flow so you can nurture those relationships to ensure a steady stream of quality investment opportunities.

4. Process Deal Flow Leads

Managing how your deals come to you is an important step to staying organized. Do your leads come in through email, phone calls, face to face meetings or other means? How do you get them into your pipeline? Is there an application form through which entrepreneurs can apply for funding or do you need to manually enter opportunities directly into your program? 

In the case of investment organizations, such as venture funds, impact funds, angel groups, and family offices, which typically have a steady flow of opportunities to evaluate, it’s important to have an easy way to capture key information. An integrated online application form for entrepreneurs to complete ensures a consistent yet flexible way to collect necessary information about a company and its product, market, team, performance, and funding needs. The application form should be customizable and tailored to fit your specific investment criteria. Using a common application form ensures consistent information is collected for each prospect, enabling a more systematic approach to review all your opportunities.

Your software for early stage deal flow management should have the flexibility to enable multiple forms of entry, whether it be through an application form or your own manual direct entry or import process, depending on your needs, deal volume and process.

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5. Manage Deal Flow Prospects and Details

Once prospects are entered into your deal flow solution, your deal flow software should allow you to track the pipeline stage of each startup investment opportunity. You and your deal team should be able to add and view notes, contacts, documents, pitch dates, next steps, and other relevant information that is important to your evaluation process. 

This process normally takes a lot of time and coordination, especially when you have multiple opportunities at different stages in your pipeline with information flowing from many directions across multiple team members. By having a central deal flow tool in place, you will save time while keeping everyone in the loop.

6. Evaluate Deal Flow Pipeline

With all your deal information consolidated in one place, it should be easy to look at each opportunity individually, by stage, as well as holistically across the whole pipeline. From new opportunities to those pitching, in investment committee or due diligence, you’ll want to record notes and additional information that factor into your decision process each step of the way. Your pipeline management tool should enable you to quickly find what you need and see which team members are responsible for which deals, how many pitch dates are coming up in the near future, and what actions need to be addressed next.

7. Monitor Invested Companies and Passed Opportunities

As investment prospects move through your pipeline funnel, you’ll filter out companies for a variety of reasons. It may be due to valuation, not meeting your investment criteria, issues discovered during due diligence, or any number of other factors. You may pass on opportunities outright or you may opt to put companies on your watchlist to monitor over time and revisit after they’ve achieved certain milestones. Just a few investable opportunities will remain after much review. And once you make an investment, you’ll need to track it along with the rest of your portfolio. 

Your early stage deal flow solution should allow you to track the reasons for passing on an opportunity or why you lost out on a deal. It should also be able to provide you with a way to monitor deals for future follow up. With a date feature and notes, the system should prompt you in the future to pick up from where things left off and to reach out to your company contact for additional information. Furthermore, your deal flow software should make it easy to view which companies you invested in and which attributes they had, thus making it possible to identify consistent characteristics to use as further criteria for future investments. 

8. Analyze Deal Flow for Insights

Your deal flow management system should turn your data into insights and enable you to conduct analysis with actionable outcomes. It should provide simple metrics like: how many deals made it into your pipeline this quarter or YTD? How many of those opportunities were invested in? Who is your best referral source? 

Your deal flow solution should allow you to run analysis, for example on industry, funding stage, the gender and ethnicity/race of the CEO or management team, or other key data points to see how many prospects match the selected criteria. You can share these types of metrics to help recruit new investors and even partner with other deal flow sources and entrepreneurs with similar criteria. Highlighting the number and types of deals coming through your pipeline can attract investors by showing a steady stream of quality deal flow leads. This may be particularly important for those organizations with investors who pay to gain access to investment opportunities.

Furthermore, sharing metrics may also help deepen partnerships with deal flow sources and entrepreneurs when you can provide statistics about the number and types of deals coming through your pipeline and the efficiency with which you process them.

9. Summarize Deal Flow Activity

Your deal flow platform should offer a snapshot dashboard summary for a quick overview of your current pipeline of investment opportunities for the quarter and for the year. It should also provide you with a summary of outcomes indicating the percent of prospects in which you invested, passed or continue to monitor. Furthermore, it should provide you with easy access to new prospects, upcoming pitch dates and action dates to help you stay on top of the big picture along with items that are the most pressing. 

These key components of a deal flow management solution will help to streamline your pipeline management by keeping your deal flow process moving along in an efficient way. With customization and collaboration, you should be able to design a process to easily track leads, process deals, and manage the details. Your team should be able to systematically evaluate opportunities, enabling you to make informed decisions to invest or pass. Built-in analysis and tools should give you instant insights into your deal flow to report out to others to retain and attract investors and additional opportunities. 

Seraf’s Deal Flow Management Platform

Seraf’s deal flow management solution for early stage venture funds, investment groups, angel networks and family offices offers each of these key features and benefits. Plus, the added bonus of being a complementary product to our acclaimed portfolio management platform, means that you have one platform for all your investment activities. To learn more about Seraf’s one-stop solution for deal flow and portfolio management, please check out our Enterprise Solution and request a demo.