Deal Sourcing
Deal sourcing is the process of finding and accessing investment opportunities, often determining entry price, quality, and competitive advantage.
Definition
Deal sourcing includes how a manager originates deals: proprietary relationships, intermediaries, thematic research, networks, operating partnerships, and repeat founder or sponsor channels. Sourcing quality influences pricing power, selectivity, and the ability to win deals without compromising underwriting standards. Allocator Context Allocators assess whether sourcing is repeatable and not dependent on a single individual. They also evaluate whether the sourcing model scales with fund size and whether competition erodes the manager’s edge over time. Decision Authority Sourcing edge is considered during due diligence and is often discussed in IC memos, especially when performance depends on access. Sourcing that appears overly relationship-dependent can elevate key person risk concerns. Why It Matters for Fundraising Managers who can explain sourcing realistically—what’s truly proprietary, what’s competitive, what’s scalable—are more credible. Overstated sourcing claims create diligence skepticism. Key Takeaways Sourcing quality drives entry price and selectivity Repeatability matters more than anecdotes Scaling sourcing with AUM is a key risk Often a central diligence question