A venture deal funnel run backwards from the fund's plan, stage by stage, to the calls each associate has to take every week.
Multiply the stage-by-stage conversion rates of the funnel and invert the product. With illustrative rates of 15 per cent from screen to first call, then 30, 35, 40, 60 and 75 per cent through to close, a VC sees about 353 companies for every investment it makes. A fund making 25 investments over four years therefore has to screen about 2,205 companies a year, 47.9 a week, and hold 7.19 first calls every working week.
Worked in full in The Venture Capital Associate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The number matters to an associate because the funnel is run backwards from the fund, not forwards from the inbox. The fund's plan fixes the investments; the conversion rates fix everything above them, including how many calls each person on the team has to take before Friday.
| Input | Value |
|---|---|
| New investments over the investment period | 25 |
| Investment period | 4 years |
| New investments a year | 6.25 |
| Working weeks a year | 46 |
| People sourcing (associates and principals) | 3 |
| Stage reached | Rate from previous stage | Cumulative from screen |
|---|---|---|
| First call | 15% | 15.0000% |
| Second meeting | 30% | 4.5000% |
| Partner meeting | 35% | 1.5750% |
| Diligence and IC | 40% | 0.6300% |
| Term sheet issued | 60% | 0.3780% |
| Investment closed | 75% | 0.2835% |
Step 1: overall conversion. The rates multiply, because each applies only to the companies that passed the stage before.
Conversion = 0.15 × 0.30 × 0.35 × 0.40 × 0.60 × 0.75 = 0.2835%
Companies per investment = 1 / 0.002835 = 353
In Excel, with the rates in B2:B7: =1/PRODUCT(B2:B7).
Step 2: run the funnel backwards from the fund. Start from 6.25 closes a year and divide by each rate in turn: 6.25 / 0.75 = 8.3 term sheets, / 0.60 = 13.9 diligence processes, and so on up to the screen.
| Stage | Per year | Per week | Per person per week | Per investment |
|---|---|---|---|---|
| Screened | 2,205 | 47.93 | 15.98 | 352.7 |
| First call | 330.7 | 7.19 | 2.40 | 52.9 |
| Second meeting | 99.2 | 2.16 | 0.72 | 15.9 |
| Partner meeting | 34.7 | 0.75 | 0.25 | 5.6 |
| Diligence and IC | 13.9 | 0.30 | 0.10 | 2.2 |
| Term sheet issued | 8.3 | 0.18 | 0.06 | 1.3 |
| Closed | 6.25 | 0.14 | 0.05 | 1.0 |
One investment costs about 353 screens, 52.9 first calls, 15.9 second meetings, 5.6 partner meetings and 2.2 diligence processes. Per person, that is 15.98 companies screened and 2.40 first calls a week, every working week, for four years. A team that falls to one call a week each will not make 25 investments; it will make fewer, or lower its bar without noticing. And because a deal takes months to move from first call to close, a sourcing gap shows up in the investment pace months later, when it can no longer be fixed quickly.
| Stage improved | Companies per investment | Screened a year | First calls a year |
|---|---|---|---|
| None (base) | 353 | 2,205 | 331 |
| First call, 15% to 20% | 265 | 1,653 | 331 |
| Second meeting, 30% to 35% | 302 | 1,890 | 283 |
| Partner meeting, 35% to 40% | 309 | 1,929 | 289 |
| Diligence and IC, 40% to 45% | 314 | 1,960 | 294 |
| Term sheet, 60% to 65% | 326 | 2,035 | 305 |
| Close, 75% to 80% | 331 | 2,067 | 310 |
Five points matter most where the base rate is lowest, because they are the largest relative improvement. But look at the last column. Better screening, from 15 to 20 per cent, cuts the companies screened by a quarter and leaves the 331 first calls untouched: the calls are set by everything below them. The meeting load falls only when later stages convert better, which in practice means calls taken with better-qualified founders. Winning more competitive deals, 75 to 80 per cent at close, saves the least effort of all, even though it is the stage partners talk about most.
The funnel is also a quality signal. If the inbound mix worsens and only 10 per cent of screened companies earn a first call, the fund needs 529 companies per investment and 71.9 screens a week to hold its pace.
What the fund then needs from each of those 25 companies is worked in what exit value a startup needs to return the fund, and how much capital the fund can keep behind them in how many companies a reserve pool actually defends.
Multiply the stage rates, invert, and run the funnel backwards from the fund's investment pace: about 353 companies per deal, 2.40 first calls a week per person here. Track the rates on true cohorts and improve the stages after the first call if the goal is fewer meetings. The free working documents for this book include the sourcing engine sheet with its monthly measures.
Rates vary widely by fund and stage, so measure your own. On the illustrative funnel the overall rate from screen to close is 0.2835 per cent, or about one investment in 353 companies, with 52.9 first calls and 5.6 partner meetings behind each deal.
Derive it from the fund's plan. A fund making 6.25 investments a year at the illustrative conversion rates needs 330.7 first calls a year; over 46 working weeks and three people sourcing, that is 2.40 calls per person per week, every week.
It depends on the goal. Raising the screen-to-call rate from 15 to 20 per cent cuts companies screened from 2,205 to 1,653 a year but leaves first calls at 331. Raising the second-meeting rate from 30 to 35 per cent is what cuts the meeting load, to 283 calls.
This article is one calculation from The Venture Capital Associate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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