Authored by Dyana Baurley

It’s believed that the limitation in deal flow is the size of the Business Development (BD) team. Logically, that checks out—most funds are lucky to have one (let alone two+) dedicated sourcing professionals compared to an investment team that’s 10-15 deep. And yes, there are only so many conferences, events, and calls I can personally squeeze into a year (though I tend to push that limit), I’d argue that the real constraint on deal flow isn’t the size of the BD team—it’s firm culture.

You can have the most aggressive, well-connected BD team in the market, but if the broader firm isn’t engaged in sourcing, you’ll always be capped by the bandwidth of a handful of individuals. Worse yet, you’re exposed to key-man risk, where your sourcing strategy relies on a single person who can walk out the door at a moment’s notice in this hyper-competitive deal environment.

So, What Does a Sourcing Culture Look Like?

So, what does a sourcing culture look like? Simply put – it is a firm’s focus on building, maintaining, and growing relationships across the M&A community. It’s a mindset that prioritizes being a good partner and treating relationships as long-term investments, not just deal pipelines.

Driving a sourcing culture isn’t a one-and-done initiative; it requires continuous reinforcement from the BD team to ensure it cascades up and down the firm. BD professionals may be the tip of the spear, but the whole firm determines the force of the jab.

Start at the Top

As much as I love my job, I know that even my most important relationships don’t want to talk to me. Don’t get me wrong – I love all my industry bankers and have built strong connections with heads of investment banking, but they’re looking to build relationships with our founding partners, co-heads of the investment team, and execution professionals who will ultimately transact. If the thought of dragging your partners to DealMax makes you want to hide under your desk… might I suggest a more curated approach?

Coordinate top-to-top meetings between your firm’s leadership and your highest-priority relationships. These intimate, action-oriented discussions yield far better results than networking events. When you get partners in a room with the heavy hitters from your Tier 1 relationships, both sides come prepared – we bring deep dives on our portfolio and commentary on near-term sell-side opportunities, while banks bring platform ideas, add-on opportunities, and off-market deals looking to transact.

Play to Your Team’s Strengths

Another reason to start at the top? If the investment team sees partners prioritizing relationship-building, they follow suit. But here’s the catch – some of my guys LOVE getting out in the market, networking with peers, and seeing a deal through from sourcing to closing – it’s a great balance to the day-to-day deal work. Others? They couldn’t care less; it doesn’t come naturally and can be insanely uncomfortable.

This is where knowing your team becomes crucial. For the naturals, point them toward market areas where you need coverage, enthusiasm can help you expand into territories you’ve been trying to reach. For those who would rather close a deal on New Year’s Eve than attend an ACG conference, play to their strengths. Figure out where they are an expert, connect them with technical relationships, and send them to tradeshows to walk the floor and naturally build relationships with banks that cover the sector.

Align Incentives Internally

We all agree building a network is important – that’s not the hard sell. The challenge is getting people to prioritize it. The solution? Align incentives, and I’m not talking about an “eat what you kill” model. Start by adding sourcing to performance goals for junior and mid-level investment professionals. We’ve all seen that rising star who got promoted quickly because they could execute deals AND maintain strong market relationships. So why not create a framework to replicate that success?

Adding sourcing goals to a performance review can be a great way to build immediate buy-in but remember – not all goals should be created equal. Remember your team member who LOVES sourcing? Give them narrow goals that help point their arrow in the right direction. And those who aren’t the biggest fans? Provide a list of areas to own that play to their expertise.

Give Your Team Something to Say!

One of the biggest barriers I hear when engaging a team in sourcing is “I don’t know what to say” – and it’s completely valid. As sourcing professionals, we live and breathe market dynamics. We know which industries are sitting out due to macro trends, what deals are getting done, and what’s exciting this year. For the rest of the team, it’s not so simple.

Think about it – if your investment team is picking their head up from closing a deal and jumping into BD calls, they can feel blindsided by topical questions like, “How are you viewing the debt markets?” They might know everything about the building products deals they just closed but have no idea your team is excited about an A&D opportunity simply because you haven’t been exposed to it.

I have gone as far as creating a summary guide covering our portfolio, notable deals, and market observations – but regular market updates in weekly investment team meetings go a long way. It’s on us to help others feel prepared when they pick up the phone. By lowering these barriers, we enable the whole team to get out in the market and fly the flag!

The Bottom Line: Sourcing is a Team Sport

A successful sourcing strategy isn’t just about having a great BD team – it’s about creating a culture where everyone sees themselves as part of the sourcing engine. When your entire firm is engaged in relationship building, you create a multiplier effect that no single BD professional could achieve alone. At the end of the day, sourcing isn’t just a department – it’s a team sport.

If you have questions or want to compare notes on building a sourcing culture at your firm, shoot me an email at dbaurley@middleground.com. I’m always excited to swap ideas and hear what’s working for others!