The Complete Guide to Proprietary Deal Sourcing

The math of PE returns has fundamentally changed. With 15,000+ PE firms globally competing for deals, auction dynamics have compressed returns on intermediated transactions to levels that barely justify the risk.

The Proprietary Premium

Deals sourced through relationships command a 15-25% discount to comparable auction processes. On a $200M transaction, that's $30-50M in entry valuation savings—which flows directly to returns.

But the benefits extend beyond price: - Better information: Relationships provide context that due diligence alone cannot - Longer runway: You can engage companies years before a formal process - Founder preference: Many sellers prefer working with buyers they know and trust - Reduced competition: By definition, proprietary deals have fewer bidders

The Data

Top-quartile PE firms source 40-60% of their deals through relationships. This isn't coincidence—it's a systematic capability they've built over decades. The question is: how do you build that capability at your firm?

Every PE firm sits at the center of an enormous network—they just can't see it. Partners, Principals, operating advisors, portfolio company executives, limited partners, and alumni collectively know tens of thousands of executives, founders, and board members.

The Network Inventory

Start by cataloging your network assets:

1. Investment team relationships: Who does each partner and principal know from prior roles, board service, and deal work?

1. Operating partner network: Your operating advisors typically have the deepest industry relationships—former colleagues, competitors, and industry connections.

1. Portfolio company executives: Your CEOs and CFOs know their peers, competitors, and adjacent market players.

1. LP relationships: Many institutional LPs sit on boards and have their own investment networks.

1. Alumni network: Former team members maintain relationships and often become sources themselves.

From Inventory to Intelligence

The challenge isn't having relationships—it's knowing which relationships are relevant for any given target. This requires:

• Systematic data collection: Regular processes to capture and update relationship information
• Quality indicators: Not all relationships are equal—distinguish between LinkedIn connections and real professional relationships
• Path mapping: The ability to see chains of relationships to any target company or executive

Relationship intelligence isn't a project—it's infrastructure that compounds over time. The firms that invest in this infrastructure create durable sourcing advantages.

Core Components

1. Contact Database
2. - Every person in your network with relationship metadata
3. - Full career histories showing overlapping tenures
4. - Relationship strength indicators
5. - Last contact dates and interaction notes

1. Company Database
2. - Private company profiles with estimated metrics
3. - Ownership status and transaction history
4. - Executive team composition
5. - Relationship paths from your network

1. Path Mapping Engine
2. - Algorithms that identify connection chains
3. - Quality weighting based on relationship type
4. - Multiple path discovery for redundancy

1. Workflow Integration
2. - CRM synchronization to avoid duplicate entry
3. - Meeting prep automation
4. - Outreach tracking and follow-up

Build vs. Buy

Some firms build proprietary systems; most find that the engineering investment doesn't make sense. Modern relationship intelligence platforms like Verata provide turnkey infrastructure that would cost millions to replicate internally.

The key is selecting a platform built specifically for PE workflows—not repurposing sales tools designed for different use cases.

Having relationship paths is useless without a systematic approach to activating them. The best sourcing teams treat outreach as a process, not an art.

The Warm Introduction Framework

Warm introductions convert at 10-20x the rate of cold outreach. Here's how to request them effectively:

1. The Ask: Be specific about what you want ("I'd love a 20-minute call to learn about his views on the market") rather than vague ("I'd love to connect")

1. The Context: Give the introducer enough information to make the connection valuable ("We're researching the industrial software space and she'd be an incredible perspective")

1. The Easy Out: Make it easy to decline without awkwardness ("No worries if the timing isn't right")

1. The Follow-Through: Send a draft email the introducer can forward—reducing friction to zero

Cold Outreach That Works

Sometimes warm paths don't exist. Cold outreach can still work when done right:

• Lead with value: Share a relevant perspective, not a pitch
• Reference specific context: Show you've done homework on the company
• Keep it short: Busy executives won't read long emails
• Multi-channel: Combine email, LinkedIn, and phone strategically

Tracking and Iteration

Measure everything: - Response rates by outreach type - Conversion to meetings - Meetings to actionable pipeline - Pipeline to closed deals

This data reveals what's working and where to invest more effort.

What gets measured gets managed. The best sourcing teams have dashboards that track every stage of the funnel.

Core Metrics

1. Network Coverage
2. - Total relationships in the database
3. - Coverage by sector, geography, and company size
4. - Relationship quality distribution
5. - Growth rate over time

1. Activity Metrics
2. - Outreach volume by team member
3. - Meeting volume and type
4. - Warm intro requests made and fulfilled
5. - Response rates by channel

1. Pipeline Metrics
2. - Companies actively engaged
3. - Stage progression velocity
4. - Conversion rates at each stage
5. - Proprietary vs. intermediated mix

1. Outcome Metrics
2. - Deals sourced through relationships
3. - Entry multiple premium captured
4. - Time from first contact to close
5. - ROI on sourcing investment

Benchmarks

Top-performing firms typically see: - 40-60% of closed deals from proprietary sources - 30%+ response rates on warm outreach - 2-3 year average from first contact to deal close - 15-25% entry multiple improvement vs. auction

Building the Culture

Metrics only matter if the team engages with them. The best firms: - Review sourcing dashboards in weekly pipeline meetings - Celebrate relationship-sourced wins prominently - Set sourcing targets alongside financial targets - Invest in training and enablement continuously

Proprietary sourcing isn't a one-time initiative—it's a muscle that grows stronger with consistent exercise.