Part Three: Accumulating Advantage and Specific Knowledge

There are three components to every investment, whether that you’re cutting an angel investment in a pre-seed round or leading a Series A round through a larger syndicate.

This investment funnel represents phases of each potential deal: see, pick, and win. In the final section of this series, we’ll focus on the third phase of the funnel: winning the deal.

Winning is comprised of two parts: accumulating advantage and specific knowledge.

Accumulating Advantage

This concept refers to small, incremental improvements that lead to a superior advantage over competitors in the space. Over a long enough time horizon, investors with the best reputations, personal brands, and relationships will win the most competitive venture deals.

This notion is fairly similar to the one introduced in Part One of this series, which focused on seeing the deal in the first place. In that section, we discussed how your ability to see quality deal flow hinges on your compounding reputation and relationships, among other aspects.

Regarding relationships, The Information summarized its findings last year, noting that “While relationships with founders are helpful, relationships with co-investors can be even more so.”

Co-investor relationships continue to compound as more deals are done together over the course of months and years, whether completed through a syndicate or side agreement.

In the same report, The Information adds that these professional and often personal relationships rely on “providing reciprocal value” and “sharing proprietary deal flow.”

Critically, strong reputations accentuate these relationships.

Reputations are often developed through personal brand building on social media paired with a high-quality investment portfolio. Reputation can also be amplified by a variety of network effects, with your city, chosen industry, and investment stage included among them.

In the most competitive deals across the globe, you will see dozens of institutional, multi-stage funds along with hundreds of angels vying to get on the cap table. In the midst of scenarios like these, investors must lean on the accumulating advantage cultivated over the years and actively pitch the founding team on their specific value-add to the investor roster.

Understanding the basics of accumulating advantage, paired with actionable improvements, will improve the odds of differentiation for operator-angels and emerging fund managers alike.

Specific Knowledge

Accumulating advantage is driven by cultivating specific knowledge.

Specific knowledge refers to your differentiated skill set in the market, often found at the intersection of one or more curiosities and personal interests.

With regards to the most recent crop of operator-led microfunds, almost every single one has publicly stated the founder’s specific knowledge for an isolated aspect of company building.

Whether it’s the future of work, deep product chops, or technically hiring support, the next wave of microfund founders similarly discovered the power of arming themselves with specific knowledge as it relates to winning allocation in competitive deals.

To drive this point home, these angel investors not only crafted their value proposition to founders around a specific component of company building but also to a distinct stage, typically pre-seed or seed investing.

By focusing on a singular stage, and oftentimes remaining flexible with check size, they were able to win quality deals on a consistent basis.

Specific knowledge, paired with accumulating advantage driven by reputation and relationships, will help you rise above the crowd of competitors in the process of winning deals.

As an operator-angel, founder, or syndicate lead, this series will help you refine your thought process behind the three-pronged investment funnel across all stages.

Conduit optimizes this investment funnel by connecting the world’s best operator-investors and founders building the next generation of startups around the world.