The business of investing has gotten a lot harder.

It used to be that being a lead investor in an undercapitalized market was a differentiator. All you had to do was plant your flag and meet with some lawyers and bankers, and you would get all the flow.

In the 2020-2021 era, that strategy proved to be wrong. I was one of the hundreds of lead investors reaching out to the same “connectors” looking for intros into companies. In 2022 I tried doing this and got nowhere. Not only was I not top of mind, but I also learned that the connectors had “called it in” during COVID and did not make much effort to go out and build relationships. All their business was inbound and easy.

The second strategy I tried in 2022 was to network with all the pre-seed and seed funds to see if they had any opportunities within their portfolio. I would go through their websites to see what companies I liked. After talking to the MDs of these funds, I learned that these fund investors were incented to mark up their books as much as possible. To do this, they needed to show their portfolio to everyone. This strategy has also failed me.

I learned that I needed to become a fully outbound shop if I wanted to lead deals. We needed to build lists of companies and reach out to them cold to get in the door. This strategy so far is working. It is much more challenging, but we are finding much higher quality companies than the ones on the “fundraising circuit.” We are generating these lists with a great software stack and two strategies – bottoms up geographical sourcing and tops down thematic research. We are planning to carry out this strategy in 2023. We will update you on how it goes!