What Stephen Curry could teach private equity

Every June, the NBA holds an annual draft for teams to select new basketball prospects from a pool of eligible players. Once a player is selected, that team has exclusive rights and no other team in the league may sign them.

Most first round picks come from a handful of top institutions. Intuitively, it makes sense that the best university basketball programs would attract the best talent, and in turn the best talent is more likely to be drafted by the top professional teams. But, have recent NBA stars taught us that maybe this model is flawed?

Look at stars like Stephen Curry, Paul George, and Kawhi Leonard. All three players came from smaller universities, with lesser known basketball programs. And, each of these players has had incredible success in the NBA. Does this mean that teams should abandon drafting from top basketball programs altogether? Probably not, but the takeaway is clear: talent can be found in areas that other teams may overlook, creating an opportunity to outdo the competition.

But, have recent NBA stars taught us that maybe this model is flawed?

Let’s translate this into deal sourcing. Historically, most PE firms source deals from a handful of investment banks, and just like the NBA, it’s worked out well for the most part. But, what talent has been missed? What deals have been overlooked just because the company’s intermediary wasn’t a household name?

When sourcing deals, try and build relationships with bankers and firms that your competition may choose to ignore. Investment banks that are smaller and more specialized, may have the type of deals your firm is looking to source.

Next time you’re at an event or a conference, skip the usual crowd and find someone outside your comfort zone to start a conversation with for the first time. Or, take a moment to reflect on your past five road trips. How often do you visit these same five cities? Maybe this is a prime opportunity to visit another metropolitan area in the country. What about your Rolodex? Are there professionals or bankers that you haven’t talked to in a while, because you are circling around the same banks? Take this opportunity to start a dialogue outside your comfort zone. The Warriors sure did.

What deals have been overlooked just because the company’s intermediary wasn’t a household name?

You never know what opportunities a simple interaction can lead to. Maybe not immediately, but in the future when the right deal comes across their desk, you may be the first call they make. Although, you won’t get a championship ring when the deal closes, you’ll absolutely feel like you scored!




Photo by Joshua Ness on Unsplash.

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