Hunting vs. Gathering in Venture Capital: The Game of Deal Flow Domination

In the fast-paced and cutthroat world of venture capital, two dominant strategies shape how firms approach deal flow—hunting and gathering.

In venture capital's fast-paced and cutthroat world, two dominant strategies shape how firms approach deal flow—hunting and gathering. Understanding and mastering these strategies is crucial, especially for emerging funds, incubators, accelerators, and angel groups. As the venture ecosystem becomes increasingly competitive, recognizing these approaches' differences is essential for survival and success.

Firms like Andreessen Horowitz (a16z) and Y Combinator can afford to be gatherers with their market dominance and elite reputations. These Tier 1 firms have built such strong brands that the best founders seek them out. They are flooded with applications from startups eager to benefit from their prestige, experience, and deep networks. For them, gathering means deal flow takes care of itself—applications roll in, referrals arrive, and founders compete for their attention.

But here’s the reality: if you’re not a Tier 1 firm, you cannot afford to gather. Gathering without a household name means you’ll be left with the deals others have already passed over or overlooked. Firms without the top-tier cachet must adopt the hunter’s mindset—actively pursuing opportunities, networking, and sourcing deals that aren’t on anyone else’s radar.

At Pegasus Angel Accelerator, we proudly embrace the hunting mentality. While our brand is growing, we know that being 100% hunters is the only way for us to succeed. Hunting means finding the right startups before they are popular, building relationships long before others are paying attention, and going the extra mile to identify high-potential founders that others might overlook. It’s labor-intensive and time-consuming, but the rewards—strong deal flow and outsized returns—are worth it.

The Passive Trap: Incubators, Accelerators, and Angel Groups Fall Into Complacency

Many incubators, accelerators, and angel groups fall into the passive trap. They mistakenly believe that quality deal flow will come to them automatically once they've established brand recognition. They rely on inbound applications or word-of-mouth referrals without investing in proactive deal sourcing.

Incubators and accelerators are particularly vulnerable to this trap. Once they gain visibility within their niche, they often receive a steady stream of applications. However, these inbound opportunities are usually startups already on the radar of other firms or founders playing it safe with their funding options. Relying on passive deal flow leads to overcrowded application pools and a cycle of investing in the same types of companies, limiting innovation and portfolio diversity.

Angel groups also fall prey to passivity. They expect startups to come to them based on regional prominence or their existing networks, relying more on reputation than actively seeking untapped opportunities. This passive mindset restricts them from discovering transformative startups, instead leading them to invest in companies that are easily accessible but less likely to generate significant returns.

The harsh truth is that passivity breeds mediocrity. In today’s competitive venture environment, firms that adopt a passive approach end up with average deals and average returns. The best opportunities go to those who are constantly hunting.

Sourcing Is Everything: The 90/10 Rule in Venture Capital

A critical point to understand is that 90% of venture capital success lies in sourcing. The ability to consistently find the best startups separates top-performing firms from the rest. After all, you can’t invest in what you don’t see.

VC firms that excel at sourcing have dedicated themselves to hunting. They prioritize building relationships, exploring new industries, and staying ahead of market trends. Gathering, by contrast, leads to a narrow and repetitive deal flow, limiting the firm’s ability to identify breakout companies.

The Dangers of Passivity: Average Deals Lead to Average Returns

Relying too much on passive deal flow can be disastrous for angel groups, incubators, accelerators, and even established VC firms. Passivity leads to a concentration of average deals—the ones everyone else has seen, the startups that are playing it safe. These firms fight over the same deals, limiting their potential for outsized returns.

Moreover, the competitive advantage of early-stage investing lies in sourcing companies that others have overlooked. Startups that redefine industries or create entirely new markets rarely come from inbound applications.

They come from relentless hunting—VCs building strong, long-term relationships with founders, tracking trends before they become mainstream, and digging into markets others ignore.

We’ve seen firsthand how the hunter mentality pays off at Pegasus Angel Accelerator. While passive firms are left with average returns, we’re actively sourcing startups that have the potential to deliver exponential growth.

The Bottom Line: Hunting is Non-Negotiable

In venture capital, the most significant returns come from the ability to find, support, and invest in groundbreaking startups consistently. Ninety percent of that success comes down to sourcing, and sourcing means hunting. For any emerging firm—whether a VC fund, accelerator, incubator, or angel group—hunting is not just a choice; it’s a necessity.

The VC ecosystem rewards those who refuse to become complacent. Firms that stay proactive and continue to hunt will outperform those that settle into passive gathering.

If you’re not hunting, you’re missing out. And in venture capital, that could mean missing the next billion-dollar startup.

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