Deal flow

What deal flow is

Deal flow is the pipeline of investment opportunities reaching an investor or a platform. The term describes volume and quality together, an investor with strong deal flow is seeing a steady stream of startups that are actually relevant to what they invest in, not just a high number of pitches landing in their inbox.

Deal flow is a top of funnel concept. It is what happens before due diligence and a decision, the deals an investor sees at all, before any of them get properly assessed. Weak deal flow means an investor is either not looking in the right places or not visible enough for the right founders and networks to reach them, and it is usually the first thing that limits how much an investor can actually deploy, regardless of how much capital they have available. An investor with plenty of capital but thin deal flow simply will not find enough companies worth backing, no matter how ready they are to write cheques.

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Where deal flow comes from

• Referrals. Other investors, portfolio founders, or the investor's own network passing on companies they think are a fit.
• Angel networks and syndicates. Membership in a network or a syndicate's list is itself a source of deal flow, curated by whoever runs it.
• Direct approaches. Founders reaching out to an investor directly, through a warm introduction or cold outreach.
• Platforms. Services that match startups to investors based on stated criteria, surfacing deals an investor would not otherwise see.

Different sources tend to produce different quality of deal flow. A referral from someone who already knows what an investor looks for is usually more relevant than an unsolicited approach, which is part of why investors often describe their deal flow in terms of where it comes from, not just how much of it there is. Deal flow that goes nowhere, opportunities that never turn into a real conversation, is generally treated as a sign the sourcing is not well matched to what the investor actually wants.