There are more players in the market — from PE firms and investment banks to independent sponsors, and they’re all going after the same targets. The dealmaking landscape has changed, and what once “got the deal done” changed with it. In the latest episode of Inside the Source, we sat down with Jordan Margolin, Head of Business Development at VSS, to dive into how he and his team are navigating the current environment.
In this conversation, Jordan shares actionable insights into building a proactive business development function, leveraging data for faster and smarter decision-making, and how to develop genuine relationships — leaving cold calls and impersonal messages in the past.
He also sheds light on the unavoidable — the impact of AI and how it can be leveraged to get better results in research, conferences, outreach, and more.
Whether you feel stuck in a sourcing rut, or you’re curious about tech-driven tactics to take your business development strategy to the next level, Jordan shares a lot of real-life insight that you can chew on.
Watch now for a close look at how the business development team at VSS stays ahead in a competitive market. Don’t miss it!
Transcription:
[00:00-00:13] Intro
[00:13-00:16] Sourcescrub: How have you seen the deal landscape evolve over the last couple of years?
[00:16-00:46] Jordan Margolin (JM): I think in the past couple of years, definitely more competition in the marketplace. Several more, you know, private equity firms popping up, independent sponsors now, creating some competition as well, but also an opportunity to back them, more intermediaries to stay in front of, you know, everybody from your larger bulge bracket investment banks down to the smaller M&A advisors and business brokers. There's just more constituents in the marketplace and more noise that you need to stand out from.
[00:46-00:49] Sourcescrub: How have these changes impacted the way you approach deal sourcing at VSS?
[00:49-02:15] JM: We've really dedicated ourselves to building out a business development function. So we now have three origination focused individuals, at the VSS team that are solely focused on finding new deal opportunities. So we actually tier out our intermediary relationships, tiers one through four and kind of base that on, you know, where are these group spending time from an industry perspective? You know, what's the quantity and quality of their deal flow? How much overlap do they have with our current portfolio? And then that will drive how often we're speaking to these groups. Not only are we speaking, you know, in formats like this over Zoom, but we still find that those in-person interactions go a really long way. So still going to a number of different conferences, whether that's ACG events, which tend to be a little bit more speed dating focused with investment bankers and private equity firms, industry-focused events where, you know, us, for example, we love the education sector. So going to education specific conferences to meet with companies and bankers. And then also one-on-one private company conferences that are hosted by investment banks. And that creates a great opportunity for us to present one of our portfolio companies that might be thinking about, you know, a transaction in the next couple of months, but also gives us the chance to get in front of company management teams and CEOs.
[02:15-02:19] Sourcescrub: What are some sourcing tactics that you feel really work but are underutilized by most organizations?
[02:19-03:42] JM: We've taken an approach at VSS where can we build out relevant content for these founders? Can we provide them some industry insights on their sector of focus and not necessarily need a conversation tomorrow, but it allows us to stay in front of these businesses. So when the time is right and they are thinking about a transaction, they know VSS is out there and interested in, you know, healthcare, tech-enabled business services or education, what have you. So making sure we're top of mind when that decision does come. I do think another piece of the market, which, you know, sometimes getting gets ignored. Of course, you have your investment banks and your business brokers and M&A advisors that are going to be close to these private companies. There's also ancillary sources of deal flow. So think wealth managers, lawyers, accountants, you know, folks that might be privy to a transaction really prior to an investment bank getting involved. You know, we always want to lead with, you know, a strong culture as well. So kind of building that personal relationship with these ancillary sources, the deal flow, exposing them to our portfolio companies. It can never be a one-sided relationship. So we want to open doors on our side with the hope that they would potentially open doors on their side as well to some of these businesses that they have strong relationships with.
[03:42-03:45] Sourcescrub: On the flipside, what are some sourcing techniques you think organization should definitely retire?
[03:45-04:35] JM: I think the days of sending a cold outreach email and just saying, hey, let's catch up. You know, those are long gone. These founders and these companies are, you know, seeing five, ten, 15, 20 emails a day from a number of different sponsors. You know, I think, the cold call can be effective, but it needs to come from a place of, you know, understanding, truly the business that you're speaking to. It can't be a generic message that you're going to send to every HVAC business you know, out there. You need to understand the needs and wants of that specific company where they're at in terms of their growth. What's some recent news? Maybe that's out there that you can point to really just creating a more personal approach to speaking to folks.
[04:35-04:38] Sourcescrub: What role does data play in your business development strategy today?
[04:38-05:42] JM: I think data plays a big role in how we think about business development here. You know, when we look back on 2024, let's say, you know, we'll be able to dive in on our CRM and say, these are the groups that have been showing us transactions. These are the number of deals we've been seeing in these specific subsectors. How do we compare to the rest of the market and market activity generally speaking? Are there gaps in our coverage both from an intermediary and a sector perspective? We're also using data to help track, you know, the return on investment for some of these conferences that we go to. How many conversations did we have there? What deal opportunities specifically came out of those events? So when we think about budgeting and planning for the next year. We have some points to look at. You know, I think at the end of the day, for us, data is of course, very important, but it really is still a relationship business. Both internally and externally, you know, we're not just getting lost in the numbers, so to speak. And we always want to have our ear to the ground and get a real pulse kind of on the market.
[05:42-05:46] Sourcescrub: Are there any metrics that you use to measure the effectiveness of your sourcing efforts?
[05:46-06:48] JM: We looked at a couple different, you know, KPIs. Of course, we want to see a large quantity of deals coming in. So hopefully there's an increase every year in the quantity of opportunities that we're seeing. We also don't want to lose the focus on quality as well. So trying to measure we actually rank our deals that come in kind of one through five on their quality. Do they fit our size range or are they, you know, growing businesses from a margin perspective, is there opportunity for add ons? So when we look back, we can get a sense of both quantity and quality. We're also looking at, you know, the number of IOIs we're submitting per year, the number of LOIs we're submitting per year, the number of management meetings we're taking, and then ultimately the number of deals that close. So I think there are always needs to be, you know, the thought around both quantity and quality, when you're originating opportunities because it doesn't help anybody if you bring in, you know, 2000 deals per year, but none of them are really a fit for your firm from a SaaS industry or transaction dynamic.
[06:48-06:53] Sourcescrub: What are the data signals you look for to determine whether a private company is a quality, transaction-ready opportunity?
[06:53-08:15] JM: When we look at a business, there's a couple, you know, a combination of qualitative and quantitative factors. Of course, we're looking at the management team, you know, do they have individuals in place and at the CEO level, the CFO level, sales and marketing, how built out is that infrastructure? Then we want to see, you know, growth. We like to invest in steadily growing healthy businesses. So looking at both a revenue and EBITDA perspective, as well as what the margin profile looks like in the business. We also want to understand, you know, what their customer base looks like. Is there heavy concentration with a specific, customer or do they have a diverse customer base as well? Outside of that, you know, I think we're also looking at do they have processes and KPIs in place? Are they using technology effectively? Those are also numbers we can pull if we do complete an investment, but want to see how built out that is as well. In terms of transaction readiness, you know, we primarily invest in private founder-owned companies. I think we've found a great way to get a sense of if a company is thinking about a transaction or kind of, you know, beefing up their capabilities is are they attending conferences more frequently? You know, are they out in the market going to trade shows, kind of getting their name out there? That can usually be a pretty good indicator that they're starting to think about doing something.
[08:15-08:21] Sourcescrub: Do you rely on any specific technologies to help execute your sourcing strategies?
[08:21-10:19] JM: I think at VSS we take, a very proactive approach as opposed to reactive approach when it comes to sourcing opportunities. And that's a combination of people and technology. So the business development team at VSS will work in conjunction with the investment team to identify specific thesis areas and subsectors of interest that we want to double click on. Once we've kind of determined which sectors we want to pursue, we'll use sources like Sourcescrub or Pitchbook or some play strategies to map out the relevant investment bankers, the relevant sponsors, the relevant companies within those subsectors of focus. And then from there, you know, that gives us a directional way to go in terms of outreach. So that kind of helps guide what conferences we're going to, what cities we should visit? We'll also use some technology sources to understand the fragmentation of the market. You know, are there add-on opportunities here for this potential investment? You know, how fragmented is that universe? What's the mix between private companies, sponsor owned companies and give us a sense of what the potential future activity in that market could be. I can see a future, you know, maybe not too long term from now where AI can be really useful for our kind of internal, you know, memo process. We do a phase one memo, for example, where we're pretty much summarizing, you know, the confidential information memorandum, that we receive. And it could be helpful in that respect, I think from an outreach perspective, AI can be really effective to help cultivate some specific outreach messaging to those companies that we want to reach out to. I do think it's still early innings, and there was a lot of hype kind of this year around it, and we're still waiting to see some proof points, but it's definitely top of mind for us to, one, implement on the VSS side of the house, but also potentially help roll out those tools to some of our portfolio companies as well to elevate their sales and marketing tactics.
[10:19-10:22] Sourcescrub: What do you look for when hiring a business development representative?
[10:22-11:40] JM: Of course, you want to be somebody who's interpersonal and can communicate and really be a strong first impression of the organization. I also think you need to be extremely organized. So you need to be able to not just communicate externally, but be able to communicate internally as well and help drive, you know, really a symbiotic relationship between the investment team and the business development team. You know, I think another, piece of the puzzle that, you know, sometimes gets overlooked is just having some discipline and resilience as well. You know, speaking of cold outreach, you're not going to have the highest hit rate sometimes, you're going to have to be comfortable with quote — unquote failure. You know, that was a shift for me coming from the investment banking world, where your your task is, do you have to get this, you know, process done by x, y, z date. In a business development role, it can almost feel more like a sales role in some respects, where you could have 15 calls in one day, or you could have zero calls in one day, and the world is not going to shift, but you'll know kind of three, six, nine months from now how successful you were a couple months back. You want somebody that's able to kind of think on their feet, be nimble, you know, be able to adapt given the room that they're in. So I think understanding kind of how they, they deal with pressure, can be helpful as well.
[11:40-11:44] Sourcescrub: Any final insights or advice for business development leaders out there?
[11:44-12:17] JM: I think authenticity, you know, elevates anybody in this market. It's very easy to get robotic and just read the cookie cutter kind of cold call script. But any time you can build trust with folks, that's going to go a long way and it's going to take time. I think private equity sometimes can have the expectation you're going to reach out to a company, and they'll be ready to do a deal in the next month or two. That's often not the case. It takes years, really, to build up trust. With a founder, with a company, you know, prior to that transaction potentially taking place down the line.
