In ENT 640 (my 5th graduate course out of 10…wooohooo!), we’ll be discussing Winning Angels by David Amis and Howard Stevenson. The first chapter of the book examines sourcing which technically is a fancy way of saying how you should strategically establish and position yourself to obtain investment deals. This tactical planning will allow you (the investor) to best locate deals that will permit you to line your pockets while also building your business and financial expertise accordingly.
So, I’m sure you’ve heard the phrase, “play chess, not checkers” well, that’s totally what sourcing is all about!
There are several ways to methodically place yourself in a prime position to “source” the best investments out there. By making valuable contacts with the right individuals within various influential arenas and subsequently building rapport with these financially savvy persons, the novice investor can effortlessly acquire information about future ventures that may be lucrative deals or merely learning experiences. Essentially, even if no money is made (I know…I know…who wants to do that?!?) the knowledge acquired grants entrepreneurs the ability to gain a tremendous amount of business acumen since they are able to see fundamentally how various rounds of financing will effect an organization. Furthermore, as discussed in Winning Angels, “future owners can gain valuable intel about what winners and losers do for future opportunities as both entrepreneurs and investors.”
Sourcing for deals is much like hunting for a job. Early on in my career I had to learn that when looking for employment you have to be precise about what you want. I’m not sure if you believe in a higher power, but I remember praying for a job; and, essentially that’s exactly what I got! A pain in-the-you-know-what! I wasn’t specific about what I wanted and had to deal with headaches that were certainly avoidable. I have since learned that being specific about what you want and being able to communicate these principles facilitates in “weeding out” potentially disastrous predicaments. Sourcing for investment deals works in quite the same manner. When looking for a job, a candidate can utilize friends and family members, online databases, colleagues, previous co-workers and even chance encounters to learn about employment opportunities. Each will produce varying levels of prospects while additionally varying in quantity (i.e online databases); whereas others will yield quality results simply because of their propinquities with various organizations (i.e. colleagues) that may be looking to hire immediately. In any event, sourcing is just the same.
By networking informally, joining investor groups, making friends with seasoned venture capitalists, and remaining open to chance encounters, future investors looking to analyze and explore the art of investing successfully will be able to find a sourcing strategy that best works for them and will yield a competitive advantage that will generate more deals and hopefully revenue as well.
Amis, D., & Stevenson, H. H. (2001). Winning angels: the seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.