Deal Flow and the World of Agents

We get asked all the time, “How is your deal flow.”

It’s great, thanks. We probably had a chance to look at 450 opportunities last year, and spent quality time on 150. This year is starting off like gangbusters, with two deals closed in January 2007, and another three signed up for the coming weeks.

This comes to mind today as we had the same company pitched to us for the third time in less than four months. It would appear that this tech company has approached three different Toronto-based investment banks / agents over the past few weeks to raise between $3MM and $5MM of equity and or debt capital.

Obviously, if the same investors get pitched the same story by different firms in a very short timeframe, people in the money-providing business are left to assume (rightly or wrongly) that:

1. The company is having a hard time choosing who its financial advisor is going to be for this round.
2. The firm that was on the file last time couldn’t get a deal closed, so they were removed in place of the new agent.
3. No one wants to put $ into the story, so the last agent gave up on the offering.

This is an easy mistake for CEOs and CFOs to avoid. If you want to raise money, and you’ve decided to use an agent, great. We love looking at deals brought to us by known agents. Just make the right choice the first time. If you aren’t happy with the job being done, make sure you find out: who did the agent try to raise money from? And pass that info along to the new agent so that he/she can call us back and tell us why we should look again.

Switching agents mid-offering isn’t fatal, but doing it twice might be.

MRM