The honest questions every investor should ask itself

The honest questions every investor should ask itself cover

In our last piece, we presented our view on the present and future of deal sourcing technology. To summarize, today it is in the same stage as CRM software was as at the beginning of the century. And soon, in-house deal sourcing will be in the same stage as CRM is today: either decommissioned or a big millstone around a firm’s neck. External deal sourcing tools simply can do everything your in-house system can (and better), all at a fraction of the cost.

But we have talked enough. Let’s turn the conversation around. Allow us to ask some questions. And let your answers decide whether you should build your own software stack or acquire an external one. Ready? Let’s tackle them one by one.

#1 Are my objectives clearly defined?

So, you want a deal sourcing tool, right?

Well… no. That is not really what you want. A deal sourcing tool is just the instrument. It is the thing that will help you to get what you want. So… what is it that you really want? Do you want a tool that identifies platform deals? One that spots add-ons for your existing portfolio? One that tracks internal data? Or do you just want to digitize your investment workflow?

If you do not have a crystal-clear answer, then it is time to go back to the drawing board and stop your development. Because if there is one thing we have learned over the past years when it comes to developing a deal sourcing platform, it is that scope creep is software’s enemy number 1.

The typical reaction you then always receive is “… but we want an AI-platform that does it all!”. But ‘doing it all’ is software enemy number 2. It goes in against everything the current API-based development age is all about.

#2 Is Software development my core ability?

Yes? Then please go for it. No? Then please don’t. Just ‘buy Salesforce’ and focus on what you do best.

#3 Are you willing to deploy significant resources to this effort?

Building a deal sourcing platform takes time. A lot of time. Years of development to match the platform’s functionalities with the users’ needs, research to cover all industries and assets, and (human) analysis to build high quality and curated data. And to make it a success, you need to be willing to commit >100x the MVP budget. To maintain the quality of the platform, continuous investments are needed of which the total can run into tens of millions. It takes an army of workers. In fact, it takes an entire business. You can quote us on that one. Let’s say we speak from experience.

#4 Can we lastingly outcompete external solutions?

All right, let’s say you answered all the previous questions positively. Your objectives are clearly defined. Software is your core ability. And you are willing to deploy significant resources. Then there is only one question left to ask: are you able to build a platform that outcompetes this external solution?

Because what you are up against is a platform that shares its development and research cost base across hundreds of different firms. One that leverages their unique client-given insights through a dedicated database. One that distills insights derived from over hundreds of calls with industry executives.

If the answer is yes, then you have something very special in your hands. If not, it will be a costly endeavor.

Decide for yourself

Customised SaaS deal sourcing is the future. But how to arrive there, is what requires some deep thought. The questions above will help you decide decision.

If you decide to build it yourself: good luck.

If you decide to buy an external solution, make sure to do three things:

  • Define your target deal universe and investment sweet spot
  • Select those parties able to provide full visibility on that asset pool
  • Build your edge through customised triggers and API connected internal data

If you want to speak to someone about it – just let us know. We are always willing to talk. But since you should be the one answering these questions – this time we will be there just to listen.

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