With billions of dollars in VC dry powder, the race to build out top-tier sourcing teams and analyze massive amounts of data to spot promising companies is fiercer than ever. It’s becoming increasingly important for venture capital firms to consistently identify growing startups and reach them at the right time to set themselves aside from the competition.

What are some challenges VCs face with sourcing and outreach?

Venture capital is a very competitive industry. 2021 saw a record $96 billion pouring into the industry filled with hungry investors chasing that next highly lucrative deal. For VC funds sitting at the top with immense brand name recognition, there’s an inherent competitive advantage. Successful startups already want to work with these funds since having a big-time investment partner speaks volumes to the marketplace about the startup’s future prospects and this can often become a self-fulfilling prophecy. These large funds have access to proprietary data, built out data science teams and a network of entrepreneurs that they can call on. However, most VCs are not quite there yet. They have to fight for investment opportunities by combing through mounds of companies with limited personnel and little to no context on where the firms are in their fundraising cycle.

Other major challenges for VC funds include:

• Difficult for associates and investors at VC funds to stay on top of thousands of startups in a given industry.
• Lack of transparency when it comes to the types of data available for some VC funds versus others.
• Confusion on the best type of data to focus on and prioritize for scanning purposes.
• Time-consuming to build a proprietary database that is kept up-to-date with the relevant data points.
• Inability to connect with the startup at the right moment – before other funds have contacted the startup and right when the company is looking to raise capital.

How do funds gain a competitive advantage?

Many funds nowadays are turning towards alternative data as a way to screen and identify profitable opportunities. Alternative data, such as behavioral and web data, helps to complete the picture and gives investors the ability to find better investment opportunities. One of the ways that funds can approach startups at the right time with a simple data point is by using Fintent’s CapRaise score.

Fintent’s CapRaise score helps you close more deals by focusing on the companies looking to raise Series A, B, C and additional growth equity rounds – so you can be there to approach them at the right moments. With extensive backtesting and research of over 1,000 companies that recently went through a Series A/B or Growth Equity fundraising round, we found that companies that raised funding performed significantly more research activity on topics related to fundraising such as Virtual Data Room, Preferred Stock, and Recapitalization versus companies that didn’t.

Each month, our model generates CapRaise scores for company lists that you are already monitoring with a 60-80% accuracy at predicting pending capital raises (depending on seasonality). We recalibrate this model on a quarterly basis to ensure the model stays accurate.

The benefits of Fintent’s CapRaise Score include:

• Ability to contact companies at the right moments in their fundraising cycles so you can get in earlier in the fundraising process.
• Focus on a simple datapoint – the CapRaise Score – rather than having hundreds of different data sets and not knowing what to prioritize.
• Outsource the data accumulation and analysis to Fintent so your fund doesn’t have to build an expensive proprietary platform from scratch.

Ultimately, not missing out on lucrative deals comes down to whether or not you’re looking at the right data points at the right time. Fintent’s CapRaise Score generates an easy-to-use score that helps you prioritize the list of companies you’re monitoring to gauge which ones are likely looking for funding. This allows your account representatives to get in contact with the entrepreneurs at the right time – likely before any of the big funds get in the mix, and can result in a significant boost to your fund’s returns. Not missing out on lucrative deals in the startup space can help your fund generate the kind of outsized returns that allow it to compete and thrive in the competitive world of venture capital.

Book a demo and see how Fintent’s proprietary model can help you uncover profitable deals.