As lately reported within the Harvard Business Review, there’s a brand new and unlikely entrant in to the emerging Social Networking arena: The investment capital firm.
Normally circumspect regarding their deal origination techniques, investment capital and equity investors are more and more placing their cards entirely take on the Social Networking table.
Based on David Teten, the Chief executive officer of Teten Advisors, a good investment bank focusing on sourcing new investments, and the co-author Chris Player, a managing partner at Ignition Search Partners, a hybrid venture search firm, a “first-ever study of deal-origination guidelines at greater than 150 VC and PE firms, as well as other research, implies that a few of the top-performing investors more and more use such technologies to go over the information they once held near to the vest.”
For aficionados of Social Networking, it is no wonder that B2C companies, such as the Ford Motor Company, Mountain Dew Beverages and Dunkin’ Donuts take full benefit of emerging media and revolutionizing their business practices. However, what can motivate a investment capital and equity firm to participate in the Social Networking conversation? The reply is deal flow.
Out of the box axiomatic in many other industries, the figures game needed to create start up business in investment capital follows the standard cycle of identifying prospects, ending up in them under favorable conditions, negotiating and shutting sales. Just like an average automobile dealer must keep 500 cars in inventory to market 200 cars monthly, the normal investment capital firm must review 80 possibilities, talk with twenty management groups, negotiate with four and search around for on three, to lead to one investment.
Mr. Teten’s firm “focuses on using Social Networking along with other internet technologies to source proprietary deals, which generally give a buyer by having an informational advantage and perhaps a lesser purchase multiple.”
Is that this Social Networking approach a pattern that may develop in other typically guarded industries? Possibly. If discussing information regarding their investment strategy propels vc’s into effective targets of chance, and when that Social Networking engagement leads to a noticable difference over keeping their cards from the table, then other financial services and insurance providers may follow.
