Originating Private Market Investment Opportunities
Developing a pipeline of attractive private market investments requires continuous research, commercial curiosity and a disciplined approach to identifying businesses worth owning.
This guide provides fund managers with a recurring set of questions designed to generate actionable investment opportunities. Organised around the Five Foundations of Investment Conviction, the framework encourages investors to begin where they have particular knowledge, experience or competitive advantage, and use those strengths to identify prospective investments. [1]
The objective is to identify specific assets, businesses or business categories that warrant further investigation and could realistically become investment opportunities. Revisiting the Origination Questions at the end of each week, or at another regular interval, helps ensure that insights gained and advantages identified through the firm's ongoing work are captured rather than overlooked. [2]
Fund managers naturally develop preferences for familiar industries, established networks and proven investment strategies. Continually questioning these boundaries can reveal overlooked businesses, emerging opportunities and areas where competition for assets may be less intense.
Execute the firm's investment strategy
Apply the firm's existing mandate, expertise and sourcing advantages to identify specific businesses worth pursuing.
Develop new opportunities
Use recurring questions and challenges to existing assumptions to uncover businesses beyond the current pipeline.
1. Begin with an area of strength
Begin by executing the firm’s existing investment plan. Apply its mandate, sector knowledge, established relationships and strongest investment advantages to identify assets and business owners worth approaching. The five foundations help clarify why these targets may be attractive and where the firm has an edge.
Start where the investment team has knowledge, access or a genuine analytical advantage.
Use targeted questions to identify specific assets, owners or investable business categories.
Prioritise opportunities that are accessible, investable and worthy of testing against the remaining foundations.
2. Questions for continuous investment origination
Sections 2–4 broaden the search beyond the existing investment plan. Use the five foundations as alternative lenses for discovering prospective investments. Revisit these questions weekly or at another regular interval, capturing ideas from the team’s ongoing work. Research into venture capital decision-making also highlights the importance of sourcing as a distinct investment activity. [3]
3. Where are we not looking?
Specialisation can be an advantage, but it can also narrow an investment team's opportunity set. The firm should periodically examine which sectors, geographies, ownership situations and deal sizes are absent from its pipeline, and whether those omissions reflect deliberate investment criteria or simply habit. Research on information transmission through customer–supplier relationships illustrates how relevant investment signals can be missed outside an investor’s immediate focus. [4]
Which businesses have we never screened? Which owners are outside our networks? What attractive assets fall just beyond our usual transaction size, geography or sector definitions? What might we discover if we reversed one of our longstanding assumptions?
4. Convert questions into an actionable pipeline
An origination exercise is only useful if it produces businesses that can be pursued. Each promising observation should be translated into a named company, a specific asset or a sufficiently narrow business category to support targeted sourcing.
Minimum output from an origination discussion
- Target: A named business, asset or precisely defined business category.
- Attraction: The specific characteristic that makes ownership potentially desirable.
- Our edge: Why this firm may be well positioned to identify, acquire or improve it.
- Investability: A plausible path to accessing the opportunity and deploying capital.
- Next action: A concrete research, sourcing or outreach step, with an owner.
The result should be a focused list of businesses worth investigating, not a collection of broad market predictions. Ideas that survive initial screening can then be assessed against all five foundations through the firm's investment thesis and due diligence process.
Conclusion: One Opportunity Is Enough
You do not need an extensive investment pipeline to begin. One attractive target is enough to initiate discussions, make offers and enter negotiations. Do not delay action in pursuit of the perfect opportunity.
A distinctive strength in one of the Five Foundations of Investment Conviction can become a repeatable source of investment ideas. Over time, building a reputation as a trusted investor can also unlock a continuous pipeline of proprietary opportunities through relationships with founders, business owners and advisers. Evidence from venture capital syndication research illustrates how networks shape access to investment opportunities. [5]
Start with one business worth owning
Companion to: The Anatomy of a High-Conviction Investment Thesis.
Bibliography
Selected academic research informing the origination principles discussed above. Studies of venture capital and public equity provide relevant insights but do not directly validate this specific private-market origination framework.
- Barney, J. B. (1991). “Firm Resources and Sustained Competitive Advantage.” Journal of Management, 17(1), 99–120. Research paper.
- Shane, S., & Venkataraman, S. (2000). “The Promise of Entrepreneurship as a Field of Research.” Academy of Management Review, 25(1), 217–226. Research paper.
- Gompers, P., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2020). “How Do Venture Capitalists Make Decisions?” Journal of Financial Economics, 135(1), 169–190. Research paper.
- Cohen, L., & Frazzini, A. (2008). “Economic Links and Predictable Returns.” Journal of Finance, 63(4), 1977–2011. Research paper.
- Sorenson, O., & Stuart, T. E. (2001). “Syndication Networks and the Spatial Distribution of Venture Capital Investments.” American Journal of Sociology, 106(6), 1546–1588. Research paper.