Given that we are relatively new at this quasi-institutional investing with Atlanta Ventures, we have had the opportunity to do the same as most startups and that is learn how to invent our own wheels. How to find deals, how to evaluate them, and how to manage the workflow and tracking.
It may help startups raising money to understand how we’ve setup our pipeline so you can understand the process. Here’s what our deal pipeline looks like. (By the way, we are using Stream CRM to manage this right now. A free CRM that is a Gmail Plugin by a YCombinator company that seems to be on a rocket ship.)
- Lead – the holding area for every possible lead, no matter the source. After evaluating tons of tools (including DIY), we have finally determined that F6S is the absolute best tool for startups, investors, funds, accelerators, and incubators.
- Want to Pitch – if the startup looks good on paper, the founders have some visible domain expertise and it’s an area not completely foreign to us, they go in the want to pitch. Usually this means Lindsay will start working to schedule a first meeting with myself or one of the team.
- Pitch Scheduled – sometimes meetings take a while to schedule so these can be in this bucket for 30-60 days.
- Want Second Meeting – After a first meeting, if we like what we see, we typically will assign some homework. We ask startups what they will accomplish if/when we get together in 30-60 days. The second meeting is largely a test to see their ability to follow-up and deliver.
- Need Outside Input – Many times, we like the founders and the idea but it’s a little outside of our team’s expertise, so we introduce the entrepreneurs to other investors and entrepreneurs whose opinion we trust for feedback on the idea.
- Second Meeting Scheduled – During this time between first and second meetings, we like to stay in touch with the entrepreneur to get a feel for what it’s like to work together. Communication styles, etc…
- Term Sheet – Once a term sheet discussion starts, we move them here. Surprisingly to me, we have only closed around half of the term sheets we’ve negotiated this year – a lot can happen in the time that it takes to negotiate a deal. Life happens, success happens, failure happens, valuations change, other investors happen. So it’s another reminder to everyone at the table that a term sheet isn’t a closed deal.
- Monitor – The 2nd largest end result is this bucket. It’s for teams that we like with pretty good ideas, but the timing isn’t right or there are a few pieces of the puzzle still missing. We want to keep an eye on these and if they request another meeting in 3-12 months, we want to be sure to take it to follow up and see the progress.
- Unlikely – I don’t like the terms that are absolute… so internally, we like to be open to amazing things happening down the road. But the bottom line is that we’ve told these teams “We are not a fit.” so we aren’t stringing anyone along.
- Worked and Passed – This is where the term sheets go that don’t close. This is the category I don’t like. It means a lot of energy was spent on something that didn’t happen. My operational goal for us as an organization is to keep this as close to zero as possible.
- Signed! – Ahhh, the good stuff. This is when the fun begins. This is what it’s all about. NOW we get to help Atlanta entrepreneurs build companies.