All Signs Point to Change: Tips to Ground Your Firm in Uncertain Times

Industry
Sourcing & Origination
Last updated:
June 28, 2022

As Benjamin Franklin once said, nothing is certain except death and taxes. The only certainty is change — and dealmakers are in for some big ones.

However, (recent) history shows us that dealmakers who take advantage of data and technology consistently rise to the top. Not only do data- and tech-savvy firms transact 55% more than their peers, but they also generate 8.3 percentage points higher IRR.

After studying the developments that correspond with improvements in deal activity and performance, we developed a 3-stage maturity model that that chronicles the necessary evolution of data, technology, and team. Maturity in these three key areas leads to proprietary advantage that creates greater certainty in uncertain times.

But preparing for change is easier in theory than in practice, so we invited two of the savviest data and technology gurus we know to join us on our most recent webinar: Tom Lesnick, Co-founder and CEO of Copilot, and Jordan Feil, Managing Director at Sixth Street Capital. During our conversation, Tom and Jordan shared their advice, experience, and inspiration around reaching deal sourcing maturity and building an unshakeable foundation.

Here are some of the top tidbits and best soundbites from our experts!

Pain Leads to Progress

According to both Tom and Jordan, times of stress or struggle often push firms forward on the path to maturity. “I think moments [of motivation] usually come with some pain, or a recognition that things are not scaling the way we want them to scale, and that's a natural sort of signal that it's time to take a step forward,” says Jordan 

“You have different stages in your maturity model, and I think that you run up against things —whether you're missing deals or you find the time that's being spent on sourcing is not necessarily efficient and you want to get the most out of those hours. That's usually where the conversation begins, and then the question turns to how.”

Don’t Boil the Ocean

Understanding how to move forward requires taking a step back and translating big, broad aspirations into tangible, measurable milestones. Tom explains, “I think trying to not boil the ocean is really helpful. Identify what the key metrics are that you really want to influence. Identify a very specific question and what the success criteria is for that and go after it, instead of just saying, ‘We want more deals, we want better efficiency.’ It’s about getting it whittled down to a very specific set of success criteria and then being able to iterate on that.”

Iterate, Iterate, Iterate

Of course, don’t expect to go from Stage 0 to Stage 3 maturity overnight: “Presumably, the first cut of whatever you do is not going to work exactly as intended and is going to need feedback and iteration,” says Jordan. “Be realistic about what it's going to take to make a step forward, depending on how complicated what you're trying to do is. It sounds great to add a data feed, but that takes work.”

He continues, “It's good to have the long-term strategic plan, but also important to have a good tactical plan around what those first steps will be that everybody's very clear on. Things evolve quickly — we're talking about the changes we've seen in the markets more recently — and if you're just working toward an enormous goal and you haven't broken it down into something that can be achieved incrementally, it's hard to pivot along the way.”

Prioritize Data Quality over Quantity

One of the biggest traps firms fall into is the belief that more data is better. Tom encourages dealmakers to seek out data products that offer fresh, accurate data that’s relevant to your firm’s investment thesis. He says, “Quality, not quantity. Less noise, more signals that are going to be relevant for the people who are looking at the data, and aggregated in such a way that they don't have to do too much digging to get what they're looking for. If you bring in every company from every database, it's going to make wading through it that much more difficult.”

Jordan agrees,“Everybody would recognize that there's a ton of data and it's only proliferating. But the key is to actually know what you want to say no to, and what you want to say yes to.” 

Sharpen Your Competitive Edge

Both our experts agree that sophisticated use of technology is only growing more critical to firms’ success, and that dealmakers must harness data to develop competitive advantages. “Over the past, call it four or five years, we've seen a shift from having to sell the vision of ways data and technology can help to firms coming to us, and really understanding the value of having a more mature tech stack,” says Tom. “They're getting asked by LPs, ‘What is your competitive data and technology advantage?’” 

“Really, really good companies and CEOs will be in even higher demand as firms get even more picky about which companies to go after. It takes time to build that brand recognition and build that relationship so that you do become the first call at a later round. The importance of that, I think, is going to only increase, so we have seen firms continue to double down on these sorts of investments.”

Want More from Our Experts?

This is only the tip of the iceberg! Catch our full conversation with Tom and Jordan when you watch the complete webinar on-demand: In an Uncertain World, Tech Maturity Helps Create Certainty.

If you’re curious where your firm lands in our 3-stage deal sourcing maturity model, and the steps you can take to level up, take our 3-question maturity assessment quiz here.

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