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Origination and Deal Sourcing

Overview

Origination — the practice of finding and winning new deal mandates — is a foundational function in both investment banking and private equity. In the lower middle market, where transactions involve privately held business owners making the most significant financial decision of their lives, origination is deeply relationship-driven. The function has evolved significantly over the past decade, with BD professionals becoming more sophisticated and specialized.

Key Perspectives

  • Kate Hopkins provides the Portfolio Operations perspective in Ep. 2, arguing that portfolio ops is increasingly a sourcing channel — not just a post-investment function. She describes a sourcing enablement funnel that deploys ops capabilities (content, events, expert introductions, community access) across the sourcing process. Her core thesis: firms should apply sales enablement principles to sourcing, using portfolio data and ops infrastructure to create data snacks, battle cards, and prospect-facing content.
  • Chris Reilly provides the banker's origination perspective in Ep. 23: Deals Still Run on Relationships, detailing VRA Partners' three-channel model and the KPIs they track.
  • Jake Colognesi provides the growth equity buyer's perspective in Ep. 20, describing Mamba Growth's all-hands sourcing model where everyone from analyst to founding partner sources, cold calls, and meets entrepreneurs. He favors the hybrid model (source + execute) over dedicated BD teams, and emphasizes tight investment lens definition as the foundation of effective company identification.
  • Glenn Oken provides the seasoned buyout operator's perspective in Ep. 21, describing Mangrove's dedicated 3-person BD team processing ~3,000 deals/year. He emphasizes precision and discipline in intermediary coverage, IC inclusion for all team members, and exit storytelling as the most powerful sourcing message.
  • Ryan Murphy provides the first-year sourcing associate perspective in Ep. 22, describing how he uses peer, advisor, and banker networks as complementary channels at Norwest. He emphasizes breaking through the noise with personalized subject lines and unique background hooks, and the sponge mindset of learning by observing senior colleagues.
  • Karl Rectanus provides the target company's perspective in Ep. 1, describing what it's like to be on the receiving end of PE sourcing. LearnPlatform's EdTech Top 40 — a data product ranking the most-engaged ed tech tools — doubled as a sourcing magnet, drawing PE firms who wanted to understand the data. Karl tracked all inbound in a spreadsheet of 175+ firms, which later became part of the source list when LearnPlatform ran a process. He emphasizes that the best outreach came from firms with clear investment strategies, sector-native language, and willingness to engage in person — and that 50–60% of the ~100 parties in his eventual process had prior relationships with the company.
  • Rod Jimenez provides the target company's perspective in Ep. 4, describing the full lifecycle of a proprietary deal from first contact to close. Rod's relationship with Dan Herr at Serent Capital progressed over approximately eighteen months — from an initial meeting at the HITEC conference, to in-person visits in Houston, to increasingly detailed conversations involving additional Serent team members. When SHR's Singapore-based strategic partners were ready to exit, Rod and Serent moved from conversation to LOI in days — without running a competitive process. Rod attributes this to the depth of relationship and trust built over time: "we were so comfortable with the relationship and who you guys were and how you conducted business and how well you understood our business."
  • Bill Nunan provides the PE-backed CEO and operator's perspective on add-on sourcing in Ep. 5. Bill argues that effective add-on M&A begins with the strategic plan, not with inbound deal flow. He builds a ranked list of 25 to 50 acquisition targets derived from the company's platform story, then treats each pursuit as a collaborative enterprise deal pursuit with the sponsor. Bill views his PE sponsor as "the corp dev team that I don't have" — the operator leads founder relationships and paints the post-close picture, while the sponsor handles deal structure and valuation. Of his 30 closed add-ons, five founders cited his CEO engagement as what "cinched the deal" over competitors who relied on corporate development professionals or PE dealmakers. (Ep. 5)
  • Dan Herr and Matt Rooney tackle the feast-or-famine cycle by arguing that PE firms should apply the same sales metrics they push on portfolio companies to their own sourcing functions in Ep. 6. Dan introduces an inputs vs. outputs framework — measuring top-prospect engagement and pipeline progression rather than total outreach volume — paired with [[granular-pipeline-stages|10–15 CRM pipeline stages]] that enable cross-sectional analysis of where prospects stall. He outlines a five-meeting cadence from annual goal setting to weekly one-on-one problem-solving, and describes pod structures that organize sourcing effort around end markets or geographies. Dan also argues that metric focus should follow firm strategy: buy-and-build firms measure add-on volume, traditional LBOs measure two to three quality deals per year, and growth equity firms measure capital deployment velocity. (Ep. 6)

VRA's Multi-Channel Origination Model

Chris Reilly describes VRA's four origination channels, with his team of three focused on the first three:

Channel 1: Referral Sources / COIs (Primary)

The "vast majority" of the origination team's time. See Referral Networks and COIs for full detail. Key sub-channels include strategic partnerships with wealth management platforms, M&A attorneys, and other centers of influence who interact with business owners.

Channel 2: Sponsor Coverage (Secondary)

Covering middle market and lower middle market PE funds, independent sponsors, and capital providers. This serves two purposes: 1. Intelligence gathering: Understanding market valuations, value drivers, portfolio composition, and sector trends — all useful for business owner conversations 2. Buy-side mandates: VRA has a growing buy-side practice, working with sponsors on platform searches and add-on acquisitions (historically more corporate buy-side work, now expanding to sponsor-backed)

Channel 3: Direct Outreach (Tertiary)

Calling directly on business owners, typically "chasing success" from closed transactions in similar sectors. The outreach uses a mix of voice, email, and direct mail. Hit rates are lower than referral-sourced opportunities, but Chris notes that in-person meeting requests get dramatically higher response rates than transactional calls.

A key tactic: building direct calling lists for a target market, then sharing those lists with COI partners as a goodwill gesture — "do you know any of these businesses?" This creates value for the COI while expanding VRA's reach.

Channel 4: Former Clients (Execution-managed)

Not managed by the origination team. Execution bankers maintain relationships with former clients, who often return for subsequent transactions or refer peers.

Origination KPIs

Metric Type Description
Market visits Leading Frequency of in-person visits to priority markets
Pitches / shots on goal Leading How often the team gets to pitch a business
Win rate Lagging Pitches won vs. lost
Revenue Lagging The ultimate measure — fee revenue with origination attachment

Geographic Market Strategy

VRA prioritizes markets by density of COI relationships — cities where they have an abundance of established referral partners. Key markets include Dallas, Tampa, New York, and Chicago. The team anchors market visits on key relationship meetings, then builds a calling list of direct targets and COI visits around those anchors.

Seasonality: Travel is heaviest late January through Memorial Day, tapers in summer, picks up again Labor Day through Thanksgiving. On average, someone from the team is traveling every other week.

Conference strategy: Selective attendance at ACG events (Atlanta, M&A South, DealMax, Florida). Also leverage one-on-one meetings organized by law firms as efficient ways to get into a market and build density.

The Evolution of the BD Professional

Chris observes that the BD function in private equity has "dramatically changed" and become "a lot more sophisticated" over his decade at VRA: - Then: "Teaser gatherers" — collecting deal teasers without deep engagement - Now: Execution-experienced professionals (from banking or PE deal teams) who know criteria deeply, articulate thematic theses, and bring genuine market intelligence

This sophistication is welcomed on the banking side — it makes qualification faster and relationships more productive.

Episode Coverage

Episode Guest Angle
Ep. 1 Karl Rectanus Target company perspective: content as sourcing magnet, inbound tracking, prior-relationship advantage
Ep. 4 Rod Jimenez Target company perspective: 18-month proprietary relationship, LOI in days, no process
Ep. 5 Bill Nunan Operator-led add-on sourcing: strategic target list, CEO-founder nurturing, enterprise deal pursuit
Ep. 6 Dan Herr, Matt Rooney (hosts) Systematizing deal flow: inputs vs. outputs metrics, granular pipeline stages, accountability cadences, sourcing pods
Ep. 2 Kate Hopkins Portfolio ops as sourcing channel: content, events, enablement, network leverage
Ep. 20 Jake Colognesi Mamba Growth's all-hands sourcing model, hybrid vs. dedicated BD, investment lens definition
Ep. 21 Glenn Oken Mangrove's dedicated BD team, precision and discipline, 3,000-deal funnel, exit storytelling
Ep. 22 Ryan Murphy Junior sourcing view: peer/advisor/banker networks, breaking through noise
Ep. 23: Deals Still Run on Relationships Chris Reilly VRA's three-channel origination model, KPIs, geographic strategy