Deal flow is not one thing. It arrives through channels with very different quality, and the channel an opportunity came through tells you something before you have read a word of it.
10 min read · Level 2
Sourcing is the part of investing that most rewards patience and least rewards effort, which is why it is so consistently underinvested in by capable people. Analysis responds to work: you can spend an extra day on a company and genuinely know more at the end of it. Sourcing does not behave that way at all - the work that produces good flow was done two years ago, by being useful to people with no transaction in sight, and nothing you do this month materially changes what you will be shown this month. I think this is why so many investors talk about their process and their thesis and so few talk honestly about where their opportunities come from: the honest version is mostly a story about relationships they happen to have, which sounds less like skill than it is. The part that is skill is choosing whose orbit to be in years before it pays, and being willing to give away useful help to people who cannot reciprocate yet. That is a real discipline and it is almost invisible from outside.
In public markets you do not have deal flow - you have a screen and a price, and everybody can see the same things you can. In private markets the opposite is true: what you get to choose from is a small, non-random subset of what exists, and the size and quality of that subset is most of your result. Two investors with identical judgement will end up with very different portfolios if one sees the best companies in a category and the other sees whoever emailed them.
Flow arrives through roughly five channels, and they are not interchangeable:
Channel Typical quality Why Operators you know Highest They see companies working before the market does Other investors High They have already filtered, but see note below Communities Medium to high Access before an opportunity is packaged Founders direct Variable Depends entirely on why they chose you Broadcast inbound Lowest on average Anyone can send it, and many did
The note on other investors matters: a referral from an investor is a filtered opportunity, but you have to ask why it is being shared. A co-investor bringing you into something they are also funding is sharing conviction. Someone passing on a deal they have declined is sharing a decision, and the interesting question is what they saw.
The channel that most people optimise first is the one that matters least. Broadcast inbound - a form on a website, a public email address, a pitch event - produces volume, and volume is not the constraint. The constraint is that the best opportunities in most categories are not looking for capital in the places that are easiest to reach, because they do not have to.
The term for flow the market has not already processed is proprietary: an opportunity you can see because of who you know or what you have done, rather than because it was sent to a list. It is worth being honest that genuinely proprietary flow is rarer than the people claiming it suggest. A useful test: would this opportunity have reached me if I had not spent those years in that industry, or knew that particular person? If it would, it is not proprietary, whatever the introduction implied.
Because sourcing determines the ceiling on everything else. Diligence, valuation discipline and portfolio construction all operate on the set of opportunities in front of you, and none of them can produce a good outcome from a pool that does not contain one. An investor who is excellent at analysis and sees only what is broadcast is doing careful work on a biased sample.
It also changes how you read what arrives. The same opportunity, presented identically, deserves different prior scepticism depending on how it reached you. From an operator who has worked in the category for a decade and is putting their own money in, it is evidence. From a mass email, it is noise until proven otherwise - not because the company is worse, but because the selection process that delivered it to you carried no information.
The third reason is that flow compounds and cannot be bought quickly. The relationships that produce good sourcing take years to build, and they are built by being useful before you have anything to gain, which is exactly the behaviour that feels least urgent. An investor who starts building flow when they have capital to deploy is already two years late.
And it is the part of the job that survives changes in market conditions. Valuations move, categories go in and out of favour, and the returns available in any particular year are largely outside your control. The quality of what you get to look at is one of the few inputs you genuinely own.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
Four opportunities in the same category, one month, one investor.
Source First impression A form submission from the investor's website Polished deck, impressive metrics A pitch event where 12 companies presented Strong presentation, clear articulation An operator the investor worked with years ago, Rough one-pager, no deck who says the founder is the best engineer they ever managed A co-investor who is writing their own cheque Detailed memo already prepared
What the channels tell you before any analysis. The first two reached the investor because they reached everyone - the form and the event are open to anybody. This does not make them bad, but the selection process that delivered them carried no information about quality, and both have likely been seen by many investors already. The third reached them because of a working relationship that no other investor in the category has. The fourth carries the strongest signal available: someone with money at stake has done the work and is acting on it.
Where the time went. The investor spent 45 minutes on each of the first two and declined both. They spent a full day on the operator introduction, because the signal was specific and the source was one nobody else had, and a half day on the co-investor deal, which needed less because the memo was real.
The uncomfortable part. The rough one-pager was the most attractive opportunity of the four. It had no deck because the founder had not been raising - they were building, and the operator knew about it because they still speak monthly. By the time that company produced a polished deck it would have been in the first two channels too, at a higher price, with more competition.
The point about effort. The investor did not find that opportunity by working harder at sourcing this month. They found it because of a relationship formed years earlier, maintained without any specific purpose. That is the honest and slightly deflating truth about proprietary flow: it is mostly a lagging indicator of who you have been useful to.
Treating volume as the goal. An investor who says they see 500 opportunities a year is describing an inbox, not an advantage - and if most of that volume arrives broadcast, the extra hundreds are mostly consuming the attention needed to do proper work on the few that matter. The question is never how many you saw. It is whether the best company in your category, this year, was one of them.
Not the last ten you saw - the last ten you spent real time on. Group them by channel. Most investors discover their genuine flow is concentrated in one or two sources, and that everything else is volume they are paying for in attention.
Operators still working in the category, not other investors. These are the people whose incidental knowledge is your sourcing advantage, and the list is usually shorter and more specific than expected. If you cannot name five, that is the finding.
Answer questions, make introductions, share what you are seeing in the category. This is slow and cannot be accelerated by intent, and it is why sourcing built during a deployment window rarely works - the behaviour reads as extraction when it arrives with a need behind it.
A co-investor putting money in is sharing conviction. Someone passing on a deal they declined is sharing a decision, and the reason they declined is the most valuable thing available in that conversation. Both are worth having; they are not the same input and should not be weighted alike.
Some is worth having - it costs little if screened fast and occasionally surprises. But give it a fixed time budget per week rather than letting it expand, because it arrives continuously and will consume whatever attention is available.
Work on sourcing deliberately when you are between deployments rather than during one, because the relationships that produce it need to predate the need. It matters most in private markets and in any category where opportunities are found rather than listed - early-stage companies, small businesses, property, private credit.
Do not chase proprietary flow in a category you do not understand. Privileged access to opportunities you cannot evaluate is worse than no access, because it produces confidence without judgement - you will be looking at things nobody else has seen and have no way to tell the good ones from the bad. Sourcing advantage and analytical advantage have to be in the same place to be worth anything.
A new investor or a first-time fund closes capital and only then begins sourcing in earnest, often with a deployment period written into the terms. The relationships that produce good flow have not been built, so the pipeline fills from the channels that are immediately available - broadcast inbound, events, and other investors' declined deals. The pressure to deploy makes declining harder each quarter. Reviewing such portfolios later, the concentration in low-signal channels is usually visible in the first year's investments and absent from the third year's, by which point the relationships exist but the capital is largely committed.
Build sourcing relationships before you have capital to deploy, not after. A deployment clock running against a thin pipeline is the most reliable way to lower your own standards without noticing.
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