Would you invest in a company that only sold to 1 out of 80 leads? Or a company that typically took one year and 3 professionals just to close a single client?
In fact, you've already invested in that company: your private equity fund. According to our data, the median investor in private companies reviews over 80 opportunities in order to make 1 investment. The median private equity fund required 3.1 investment team members to close one transaction in one year. By the standards of most traditional sales processes, private equity origination is a very inefficient and labor-intensive process...despite the fact that an effective deal origination process is fundamental to successful investing. This is particularly surprising given that private equity funds who employ a pro-active origination strategy have consistently higher returns, driven by both greater quantity and higher relevance of incoming investment opportunities.
We recently completed the first-ever study of how private equity and venture capital funds originate new investments. We drew on our personal work experience with leading institutional investors, in-depth interviews with over 150 funds, and our proprietary dataset of their origination practices. ....