Private Equity

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Investing in startups: where to find off-the-beaten-path deals?

Finding deals is good. Accessing the ones you don't see everywhere is better. How to source off the beaten path.

Thibaut GIMENEZ

/ Sommaire

Finding deals as a Business Angel is good. Finding the best deals is even better. But the mustis having access to the ones you don't see everywhere. So, how do you do it? What are the secrets of the best Business Angels? Here are our 6 tips!

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1. Build a strong network

Go to coworking spaces, events, and workshops. Mix group meetings with more in-depth one-on-ones over lunch or coffee. Also, remember to network with deal flow providers like lawyers, accountants, and incubators (to name just a few).

And don't just go to the most popular or crowded events! Visit lesser-known incubators, explore different ecosystems, and check out smaller cities. Off-the-beaten-path deals require off-the-beaten-path locations (it only makes sense!). Plus, that’s where you’ll find less competition for deals and sometimes lower valuations.

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2. Meet all types of startups

Meet as many startups as possible at every stage of maturity—before, during, and after their creation. Why not just focus on entrepreneurs currently raising funds? Because even if their companies are already too big, there’s a good chance these entrepreneurs will start another one later. And even if they don't, they know other entrepreneurs who have started or will start their own companies. So, don't neglect LinkedIn and networking within your circle!

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3. Aim for long-term relationships

You won't be able to do it every time, but the must goal is to build a genuine, long-term relationship with entrepreneurs. And do this well before they start raising funds. This helps build trust and allows you to see how they develop and manage their companies. Because yes, an insiderperspective is always better!

Sometimes you’ll meet entrepreneurs who don't want to raise funds in the traditional way but wouldn't say no to bringing on an advisor paid in equity. It’s a slightly more informal way to find deals, but it can work!

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4. Don't just "follow the trends"

Another point to watch: never assume that the presence of a specific VC is a guarantee of a good deal. Sure, the odds might be higher, but it’s not a sure thing. Everyone can be wrong, even the big VCs. And that is the golden rule of any investment: never be a sheep!

Still, pay attention to the files sent to you by entrepreneurs or Business Angels successfulyou trust. Because, despite everything, they are more likely to be interesting.

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5. Have strong convictions

The important thing is to forge your own convictions. There’s no secret to this: you have to see a lot of deals, a lot of companies, understand the entrepreneurs, and be able to form an objective, well-reasoned, and solid opinion on a deal and a team quickly. Then there’s the little "extra": knowing the exit prices of companies in the countries where you operate. For example, in France, most startups are sold for between €30M and €100M. In the United States, however, many companies sell for over $100M. When you invest, the goal is to achieve a significant multiple, so this is an element you shouldn't overlook.

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6. Become an expert in your sector

If there is a market you know inside out, go for it! Even—and especially—if it’s a niche market that doesn’t necessarily interest other Business Angels. If you know your stuff, take advantage of it; it’s often a sign of great opportunities.

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What does a good deal look like?

If the project you’re analyzing ticks several of the 6 boxes mentioned above, there’s only one thing left to do: learn how to analyze a good deal. It’s a mix of several things: