Deal flow (or dealflow) is a term used by finance professionals such as venture capitalists, angel investors, private equity investors and investment bankers to refer to the rate at which they receive business proposals/investment offers. The term is also used not as a measure of rate, but simply to refer to the stream of offers or opportunities as a collective whole. An organization's deal flow is considered "good" if it results in enough revenue- or equity-generating opportunities to keep the organization functioning at peak capacity.
Contents
In venture capital
The most famous and successful venture capital firms regularly receive hundreds of business plans each month. From among these, it is not unusual for a VC firm to actually fund only 0.25%–0.5%. Active angel investment groups will typically receive dozens of plans monthly, but because of the much smaller number of plans compared to VCs they tend to fund a somewhat higher percentage (0.5%–1.0%). Once a company makes it through the group's screening process, however and is invited to present to the group's full membership, its chances of getting funded rise to about 18%, according to the University of New Hampshire's Center for Venture Research.
Impact of the JOBS Act on deal flow
Deal flow on the Internet is currently undergoing a fundamental transformation due to the JOBS Acts passage in the United States. Soon, equity based deals and funds will be able to be marketed to the public through equity crowdfunding. This is normally referred to as general solicitation. General solicitation of these equity deals will increase the deal flow on the Internet.