Steps for Data Driven Deal Shop

Sourcing & Origination
Last updated:
March 1, 2022

Companies are increasingly adopting data driven culture to transform human resources, sales and marketing, business development, operations, and other areas across a wide spectrum of industries. The approach holds the promise of more objective decision-making and a stronger bottom line. Here are our tips for what to consider and what to do in order to build data driven change.

What is a data driven culture? 

The main strategy of what can be thought of as “Old School” deal origination is based on networking, relationships, and relying on your charisma to close deals. But knowing the right people isn’t enough as the market grows and becomes more competitive, which has prompted the rise of data driven culture and deal sourcing. 

Technology is the single most important driver for data driven change, giving professionals the ability to move quickly, stay organized, and achieve a sustainable competitive advantage in today’s private capital markets landscape.

Data driven deal flow, like SourceScrub’s New School Deal Flow, leverages technologies and data sets that allow firms to take a structured, differentiated approach to their deal making. By being data driven, firms can create and pursue unique perspectives and experiences in the market which helps investors not only land deals but also add value in their portfolios. The New School method of deal origination stands out from the old school method by using a data-driven, strategic, and differentiated approach to finding and closing more and better deals.

Recognizable qualities of a data driven culture:

  • It is forward looking - The role of data and analytics shifts from solely using historical reporting and performance review to use in combination with the addition of predictive analytics.
  • It’s company wide - The use of data and analytics is scaled and integrated with operations and applications.
  • It uses a full toolkit - A set of core capabilities—such as data sourcing, standardized analytical tools, analytical models, like those offered by SourceScrub—is available to all lines of business for a range of uses.
  • It creates a new league of professionals - The team is refreshed with new experts and seasoned in-house talent, including “tweeners” who understand both business and technical aspects.
  • It has front-end data access - Centralized and authoritative data sources are accessible for analysis, decision-making and reporting.
  • There is a data standard - Data is a strategic asset across the organization, with formal procedures and accountability to maintain accuracy and timeliness.
  • There are benchmarking metrics - The impact on business as a result of data and analytics is continually measured through a set of KPIs.

The Benefits of Becoming a Data Driven Deal Shop

Higher IRR - Because calculating IRR is an extremely intensive and complex process, the more information you are able to gather, the better your internal rate of return calculations will be. 

More consistent performance - Gone are the days of spitballing investment projections. When your shop becomes fluent in data, you can deliver more accurate predictions, which means better and more consistent performance. 

Better portfolio integration and deal sourcing velocity - Making a portfolio that is packed with a variety of quality investments makes deal sourcing a lot easier, and that process is sped up substantially (and more accurate) with a focus on data gathering and governance. 

Tips for Becoming a Data Driven VC & PE Firm

While there are many ways to make the transformation towards becoming a data driven cultured firm and improved New School Deal Making, it is our belief that these areas include the unavoidable tactical shifts that successful deal shops will have to make:

1. Create Organizational Alignment

2. Get Operations in Order

3. Know your Organizational Metrics

4. Make the Necessary Technological Changes

5. Align & Show Your Work

6. Compare Against Competitors & Analyze Solution Delivery

New School borrows heavily from the transformation that has happened across many sectors of our economy – notably within the startup oriented technology sector. Here companies are heavily utilizing technology, data, and process automation to rebuild their front offices. 

1. Create Organizational Alignment

First things first: To become a data-driven firm, the entire organization needs to be aligned in that direction. What does that mean? Well, the four pillars of the company must be aligned towards data driven results. That means:

  • Revenue
  • Reputation
  • Efficient practice
  • Risk mitigation

If revenue streams are not pointed toward data-driven results, the company doesn’t have a solid reputation for using data, practices are not efficient and streamlined for data use, and risk management has not been updated, the whole thing can fall apart. 

2. Get Operations in Order

Once all departments are aligned in the direction to meet organizational goals, the next step is to create a plan for how departments are going to meet those goals. This can include forming new departments, teams, or doing other restructuring to achieve those goals. The two important areas to focus on are recruiting and honing new specialized talent, and management will synergize with other teams. 

Talent & Focus

Establish a dedicated data-management function to formalize data’s role in the organization. Source and nurture raw talent by building the bottom of the pyramid with recent grads from local universities; groom them over time through an apprenticeship model and continuous external training. Insist that employees are code-literate and conceptually fluent in quantitative topics. 

Management Team Buy-In & Alignment

MBI is when an outside manager or management team purchases a controlling ownership stake in an outside company, and replaces its existing management. This type of action can occur when a company appears to be undervalued or poorly managed. 

Similarly to add-on acquisitions, MBIs require a level of insight to determine whether a prospect aligns with your investment thesis and if it can be a worthwhile deal. A lead scoring model can be useful to help identify if there is more value in a company than previously thought, or if its value can be increased by changing how it’s managed. This ability to recognize and quickly seize a good investment opportunity that others previously didn’t, gives companies a chance at a brighter future, and can increase IRR. 

3. Know Your Organizational Metrics

Metrics allow companies to track their progress and quantify their performance to help them identify what and how they need to do differently to improve their organization. This is important to differentiate their strategy and cut back on wasted time and efforts. 

Employee Attrition

What’s the rate of employees voluntarily leaving your organization? Costs involved with retaining staff will almost always be less than those training new team members. 

If the number of staff who choose to leave is increasing, this is a good indication that there is a problem in your culture that needs to be resolved.

Employee Satisfaction

An unhappy culture will have a severely negative impact on productivity. Regular anonymous surveys will pinpoint areas of concern and provide valuable data to direct efforts aimed at improving organizational culture

Performance Reviews

A good performance review system concentrates on growing employee skills and value and helps build a productive and balanced workforce. Periodic reviews give a snapshot of staff performance, but they should not be the only way we measure how well staff are functioning. Encouraging regular one-on-one sessions between managers and their team members will mean that formal performance reviews do not present unwelcome surprises. Effective leadership practices will allow you to constantly measure the sentiment and performance of your staff

Operational metrics

Measure how well your production systems are performing. Is an application available if most functions are available, but some are not? If most users can access the application, but some cannot, do you class it as being available?

4. Make the Necessary Technological Changes

The digital age of information can make keeping up with technology seem like a daunting task. The reality is that deal shops must be constantly adapting and updating their tools and resources to stay on point with the market and the competition. The below technology are nuts and bolts that help an organization flourish and allow you to keep expanding and adapting. 

Analytics Tools

Tracking and analytics is the process of gathering, analyzing, and applying data, information, and reports related to the content prospects interact with online. Examples of analytics and tracking platforms are Google, SugarCrm, and Salesforce. 

Social analytics specifically focuses on the data obtained from content shared on social profiles and the social profiles themselves. Examples of social analytics are Hubspot and Mailchimp. Businesses use social analytics for a number of reasons:

Understand the metrics that matter most, such as engagement, reposts, shares, clicks, impressions, and sessions, especially in the context of your marketing plan. Identify effective ways to increase brand awareness and reach that resonate with your audience.

SourceScrub’s TAM and Deal Origination use a best-in-class search and filtering functionality to cut through the 'noise' out of company lists in seconds. Prospecting the field has never been easier. Our platform cuts away meaningless or irrelevant data so you can track target opportunities proactively. Your team will receive actionable alerts as soon as employee growth, executive hire, or fundraising changes occur in your deal targets.

Project Management Tools

PM tools are exactly what they sound like--tools designed to assist individuals or teams to effectively organize and manage projects and tasks. Examples of features that many project management platforms have include:

  • Collaboration - These tools help assign and complete tasks, add comments, and organize dashboards for easy proofing and approvals.
  • Documentation - Organize files for editing, versioning, and storing.
  • Evaluation - Track and assess productivity and growth with resource management and reporting
  • Planning/scheduling - Plan and delegate work all in one place with tasks, subtasks, folders, templates, workflows, and calendars.

PM tools are helpful for any project, but they are especially important for large transitions like the aforementioned MBIs and add-ons, and in becoming a successful data driven firm. 

Raw data can be messy, and the data enrichment functionality of SourceScrub provides powerful data sifting tools. AI-augmented, human-audited company data is siphoned from prospects, and your team will be able to filter by size, ownership, and sector to quickly identify top opportunities. Plus, SourceScrub integrates with SalesForce, DealCloud’s DataCortex, and SugarCrm, and data can be easily exported for use in other platforms.

Sales Management Tools

CRMs, sales analytics, and tracking systems are crucial to evaluating sales performance. 

Many businesses already use CRMs for sales, marketing, and management, which can easily be used to track and analyze data to help you create your lead scoring model. Typical features offered by a CRM platform include:

  • Lead management - Automatically or manually enter new leads into the CRM and track and analyze data about them.
  • Marketing automation - CRMs can automatically send marketing emails or publish social media posts according to a schedule. 
  • Sales automation - CRMs track customer interactions and automate selected business functions of the sales cycle that are necessary to follow leads.
  • Workflow automation - CRMs optimize processes by streamlining workloads to free up employees for more complicated tasks. 
  • Analytics - CRM solutions can offer built-in analytics tools for insights to analyze attributes in the data
  • Artificial intelligence - CRM solutions can offer AI capabilities built into their systems to help automatically recognize patterns leading to successful sales, which can help you build more accurate strategies for future efforts.
  • Individualized experiences - CRM can be used to create personalized and consistent experiences across various marketing channels to help increase conversions and brand awareness.

Lead Magnets

A lead magnet is what it sounds like; a tool to attract prospective leads by offering them an incentive in exchange for their contact information. The incentive is usually one that can help you gauge their interest for future transactions, while also evaluating their qualifications as a lead. Lead magnets usually come in the form of digital, downloadable content, such as a demo, free case study, checklist, eBook, report, resource list, guide, whitepaper, workbook, video, etc. This is a helpful tool because the data derived from interactions like these are both the behavioral and demographic information needed for lead scoring. 

Data Science Teams

Your organization will require a data science team. The purpose of this team is to establish a dedicated data-management function to formalize data’s role in the organization. Data science teams are not siloed; in fact, they’re there to advance the role of data in every single department at your firm. 

PE and VC culture is a high touch environment, and turning to data over personal relationships and gut checks seems like a culture war that can’t be won. But data-focused teams are not just about looking at numbers. Solid data can form a competitive advantage, helping build a firm foundation that supports the thesis that a company makes. A data driven culture and organization gives outbound teams the tools they need to find, research, and connect with prospects outside of the traditional networking and speculative methods. 

When you turn away from the gut, and go with data, your firm reduces dependence on conventional ways of thinking that are rapidly starting to turn firms against themselves. 

Data sets the strategies that will form the direction that different departments pursue. No more shoot the moon projects--everything becomes measurable and actionable. 

How do you build a team whose sole purpose is to manage and control the flow of data? Look within, and start with new blood. Source and nurture raw talent by building the bottom of the pyramid with recent grads from local universities; groom them over time through an apprenticeship model and continuous external training. Before long, you will have the benefits of New School data science paired with old school relationship building. 

Technical Resources – In order to ensure you can implement and configure your new systems, you need IT and/or technical resources that can help implement, configure, and problem solve. The New School path is inherently a path of technology adoption. You need technical resources that understand the business needs of the investing and operating team so that they can define the technology in the way that will be most useful.

Sales Operations and Marketing Operations – These two areas are different from your IT team, and are critical to get CRM, Marketing Automation, and Outbound Sales tools working correctly. A good Ops person will ensure that your deal teams can make the transition to be that much more productive and get the return you’re looking for. Setting accountability and compensation around efficiency of the deal team and success of sourcing is one way to align goals.

Engineering and/or Data Teams - Firms farther along on the maturity cycle have engineering and data teams that are building advanced algorithms for scoring market verticals and companies. They are combining both publicly available data sets with their own internal data (for example, conversations they have with companies on actual revenue numbers), to create proprietary views on the market.

Outbound Associates and Analysts -  While these roles have been with deal making firms for some time, many are re-envisioning the role to focus it on outbound prospecting tactics. Associates and analysts use a variety of tools and data systems to source and prospect companies. They use advanced contact services which ensure accurate emails and phone numbers and will use a variety of personalized outreach sequences to maximize chances of connecting with promising companies.

5. Align & Show Your Work

Organizational alignment is important to the success of any change or transition in a business, and being able to show the process and results of alignment is equally important for an accurate outlook. 

Data Science & Analytics to “Sales” Team Alignment

Link accountability for data to objectives at the department, team, and personal level. This creates governance mechanisms to eliminate artisanal data shops, and adhere to global standards for use of data.

Establish rotational programs to develop “tweeners,” who understand both business and technology, and can bridge the divide between silos. For more advanced talent at the top of the pyramid, crowd-source from the external data-scientist community through competitions. 

Apply analytics to recruiting data talent. Team integration and alignment becomes easier and more efficient when you utilize the right tools for easy communication and collaboration. 

Financial Results

These results show how well you’re managing the cost of service delivery. They also show any budget variance, including direct and indirect expenses, respect of budgets, and actual costs vs. targeted costs. 

The average resource cost is the average cost of technology resources, and shows how well costs are being controlled by using lower cost resources where appropriate and can also indicate how well balanced the technology workforce is. Here are some good questions data can answer:

  • Are you using too much high-priced short-term labour?
  • Are you making use of cheaper outsourced resources where appropriate?
  • Is your IT organization top-heavy, with an overabundance of managerial level positions?
  • Are you spending most of your money in operational and support areas?
  • Is your innovation and development area under-funded?

Keep track of the average resource cost instead setting limits on different types of resources to allow IT leaders to use best judgement in the appropriate makeup of their resourcing. Costs by activity highlight whether you have the right balance or show exactly where you need to make improvements

6. Compare Against Competitors & Analyze Solution Delivery

Competitor analysis and solution delivery go hand in hand. Here’s what to do. 

What are your product costs?

On a project or product basis, ask yourself:

  • Was the project delivered within the allocated budget?
  • Was the budget accurate?
  • Did the solution you delivered provide the expected business benefit?

For example, if there were production defects, measuring defect identification and removal will give a good picture of the effectiveness of your testing practices. Look at the number of defects identified and corrected during development and compare this to the number discovered during the first 30 days of production.

What are your competitors doing?

Using historical data can help to set goals and metrics for achievable continuous improvement. Benchmarking against direct competitors, within similar processes or technologies or compared to other successful groups within the organization, can motivate workers to understand and implement best practices. Setting visionary goals that match a disruptive strategic change can guide workers to be creative in gap closure efforts.

Embrace Data with SourceScrub

Data driven solutions can dramatically change the face of your organization, both in practice and in the bottom line. With the right mindset, radical transformation is possible. If you’re looking to better understand the nature of deal flow in the 21st century, check out our New School Deal Flow for powerful insight into better deal sourcing. You’ll get the tools, support, and expertise to better leverage deals going forward.

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