Private equity deal origination is treated as an activity and behaves like an investment: sustained spending with no visible return for a long time, then a return that arrives in a lump and gets attributed to something else. That shape is why most origination programmes are abandoned in year two, shortly before the point at which they start working. This page sets out the four steps and names the one that gets skipped.
Step one: a sector narrow enough to be known in
Being the fund that owners in one niche have heard of is achievable. Being known across mid-market industrials is not, for anybody below a few billion. The narrowness feels like it shrinks the opportunity and is what makes the rest possible, because reputation does not distribute across sectors.
Step two: produce something an owner would forward
Analysis of the sector that somebody running one of these businesses finds useful, published where they would find it. It fails when it is written for other investors, which is the default failure because that is the audience the author knows. The test is whether an operator would send it to a peer.
Step three: meet people who are not selling
Repeated conversations with owners over years, so that when they do sell you are not one of twelve names on a banker's list. It is the hardest step to justify in a quarterly review because it produces nothing measurable for a long time, and it is the step the whole strategy depends on.
Step four, the cheapest and most skipped: record it
Who was met, when, what was discussed and who introduced them. Three years of relationship building held in one partner's memory is an asset the fund loses on the day that partner leaves. It costs one record per conversation and it is the difference between a firm asset and a personal one.
Questions people ask about private equity deal origination
How long does origination take to work?
About three years for a sector reputation channel, which is why so many programmes are abandoned in year two.
What is the most avoidable mistake?
Not recording the relationships. Three years of work held in one partner's memory leaves with them.
How narrow should the sector be?
Narrow enough that owners in it have heard of you. That is usually much narrower than a fund is comfortable with.