Historically, early-stage opportunities were exclusive to a small set of individuals in notable tech hubs. While network driven deal flow is still strong, the rise of online platforms has increased transparency and allowed a broader base of investors to access deals.
Yet, if the challenge in the early 2000s was no deal flow the challenge today is too much deal flow. Globally, there are hundreds of online crowdfunding platforms. Creating a profile on AngelList has never been easier and as a result online platforms have an overwhelming number of deals. AngelList currently hosts over 300,000 companies and even less notable platforms such as crowdfunder boosts over 5,000.
It takes significant time and effort on behalf of investors to curate this deal flow. AngelList has attempted to add a level of curation via its syndicate program; however, it is unclear if syndicates are providing crowds access to their best deals or only to rounds they can’t complete within their own networks.
Another approach to curating deal flow is to let incubators and accelerators hand select promising ventures. However, there is no statistical evidence that these programs are beating the average. But, even if they were, access to prominent demo days is often restricted to established early-stage investors in Silicon Valley.
Thus, success in the early-stage investment arena is going to depend on an investor’s ability to efficiently distinguish high potential opportunities from the rest of the pack.