Inbound leads are every salesperson's, marketer's, and dealmaker's dream. They come in warm and ready to talk or, if you're lucky, ready to close a deal. However, a deal flow that's only made up of inbound leads isn't the most reliable.
As firms and organizations increasingly specialize, they're quickly becoming simply the cherry on top of a well-comprised sundae. The markets, too, are also becoming more niche, creating far narrower pathways to success.
While marketing teams work to bring in leads at scale and sales teams work to close them, companies in the high-tech industry have employed a tactic that helps to close the gap between the two departments and augment their activities: business development (BD).
Now, private equity (PE) is taking notes, and PE business development is quickly becoming required. To ensure your firm doesn't fall behind the curve, let's discuss how tech companies have been using business development to their advantage, where private equity can learn from them, and the potential roles and career paths for those looking to break in.
Generating business in tech was built on the backs of marketing and sales teams. But driven by increasing revenue and sourcing new customers in an ever-changing world, tactics have continuously evolved over the years.
Of course, some things are still the same: Marketing is responsible for driving leads en masse. The more popular strategies today include social media, email marketing, and search engine optimization (SEO), which are all intended to attract the most leads for a single activity.
Similarly, sales is still largely responsible for bringing the highest-quality and hottest leads across the line. But as the average number of sales touches needed for contacts to respond reaches the double digits, the importance of personalization and making a human connection has never been higher.
Business Development sits between these two departments, bridging the gap between marketing's wide net and sales's hyper-focus. BD is responsible for sourcing new leads and helping to close them. And the key to their success is how they do it: building relationships.
To create a healthy M&A pipeline, organizations often include multiple deal sourcing strategies that involve many different roles. It's common to have analysts, associates, VPs, and sometimes even Directors/Principals involved in deal origination.
Business Development is turning that idea on its head. In BD, just one person or team is dedicated to sourcing, building relationships with, and then helping to close potential investment
opportunities. Rather than spread out responsibilities all over the firm or organization, keeping the team focused lets each member home in on the skills that will benefit the firm most.
Now, BD roles and departments in private equity organizations are far more prevalent. The function is even quickly becoming a requirement for Limited Partners (LPs). As Bill Matthews of BraddockMatthews said in an interview with Capstone Partners, "If you don’t have someone, LPs are going to be asking why not, and how you differentiate yourself from a deal sourcing standpoint in a very competitive market."
PE business development isn't just about talking to prospects. While utilizing your connections to network and build rapport with founders and executives is certainly important, there is still a level of analysis and research that comes with the role.
On any given day, a BD team will need to map markets, research the company and contact information of a potential inbound opportunity (as well as its competitors), prioritize leads, perform outreach and schedule meetings, and of course, directly deal source. The BD role is incredibly important to its organization and the weight on PE business development's shoulders can be quite heavy.
Luckily, just as tech companies have used software and technology to lighten the load, private equity organizations can do the same.
Just as private equity firms are embracing their uniqueness and building specific investment theses, every firm approaches business development a little differently. Some may place more importance on attending conferences because, through data-driven decision-making, they know that this converts higher than cold emails.
That said, technology helps streamline the entire dealmaking process, no matter what deal sourcing strategies your organization may use. Software such as deal sourcing platforms can help your team surface more potential investment opportunities much more quickly than they could manually. The more advanced platforms can even create lead scoring models that help prioritize companies that match your organization's criteria.
As a part of your firm's tech stack, deal sourcing platforms can keep your team apprised of any new opportunities as well as changes to ones already in your M&A pipeline. So, rather than manually mapping markets, researching contacts, or creating 60 versions of an outreach email, AI-powered deal sourcing platforms and customer relationship management systems (CRMs) can make your entire firm's processes — including business development — much easier.
With its rampant rise in popularity, private equity business development is attracting many candidates, including those from outside the industry. In their video, TJ Deal, VP – Practice Dealer for Charles Aris, explained their executive search firm's process for finding BD professionals for PE firms. In 2020, they sourced just one Head of BD. As of last year, this has jumped to about one a month.
While there's relatively little wiggle room for those looking to break into private equity as a whole, the PE business development career path is largely undefined. To date, it's uncommon for candidates on the investment path to private equity to cross over with the business development path. The skill sets generally require different proficiencies and someone suited to a more traditional role in private equity may not be as successful in BD.
So, for someone looking to break into private equity business development, there are many different opportunities, especially for those already with a BD background in high-tech. Project managers, sales account executives, and other deal origination or financial investment roles in high-tech seem to find the most success in landing a role in the PE industry.
However, don't despair if you're looking and your background doesn't match. Regardless of the trends, the path to a successful career in PE business development can be of your own making, as we saw in our webinar with three BD professionals.
As we've mentioned, private equity business development is responsible for finding and then closing deals with a targeted group of investment opportunities through building rapport and personal connections. And, while PE organizations can approach BD in varying ways and adopt different tactics, there are a few commonalities among BD professionals:
That said, depending on the deal sourcing strategies and methods by which an organization approaches BD, ideal skill sets will differ from firm to firm. For instance, if conferences are a higher priority than online deal sourcing strategies, candidates who are better at in-person networking and more comfortable with higher travel may be prioritized over those with more proficient email writing skills.
In both high-tech companies and private equity organizations, roles in business development usually start with a Business Development Representative (BDR). They are largely responsible for identifying and qualifying any potential leads or investment opportunities and are often the first roles a firm may fill. From there, the career path generally progresses toward Account Executives, then Business Development Managers, Director of BD, and finally, Vice President of BD.
While it's sure to keep increasing in prevalence and importance, private equity business development isn't yet table stakes. But, as your organization can no longer rely on inbound leads as a main deal source, BD is a strategy you can adopt that will help fill out your M&A pipeline and keep it healthy over time.
If you're struggling with deal sourcing and looking for more creative strategies to ensure you win more, download our eBook for innovative ways to get deals done now.
