👋 Welcome to the 30 new readers who joins us this week and welcome back to everyone else.
Last week we talked about one of my favorite topics. Today, we’ll be talking about the topic with one of the largest disconnects between what GPs say, and what LPs want to hear.
“Oh no, they are going to talk about their proprietary sourcing”
- Me in most meetings
After sitting through thousands of manager pitches, I can tell you this: the ones who talk about “exclusive access” usually don’t have it. The ones who win have something far better - discipline. They pick a lane, build relationships over years, and keep showing up when others move on.
In this piece, I share:
Why proprietary sourcing is mostly fiction
What “advantaged sourcing” actually looks like day-to-day (and what Steve Young has to do with it)
How LPs can test whether a GP really has a sourcing edge
And what you can learn from this as an LP
It’s not about having unique access. It’s about being one of the 10 PE firms that gets the call when a seller decides to run a limited process.
A sourcing model example I like: GTCR's industry lens
Before diving into how to test sourcing claims, here's a framework that makes the whole exercise more productive: GTCR's model for identifying attractive industries (and no, it is by no means only GTCR doing this).
GTCR summary (generated by ChatGPT)
GTCR is a leading private equity firm based in Chicago, known for its disciplined, thesis-driven investment approach often summarized as “Leaders Strategy™.”
GTCR, founded in 1980 is particularly recognized for identifying and backing proven executives early- often before a specific acquisition is made - and then working with them to pursue strategic acquisitions and organic growth. Over the decades, GTCR has raised more than $35 billion in capital and built a strong reputation for combining operational expertise with deep sector insight.
Most GPs say they have relationships. Few can articulate which industries are worth building relationships in. GTCR's approach is disciplined:
Fragmented markets with consolidation potential
Essential services customers can't skip - predictable, non-cyclical demand
Recurring revenue that compounds trust and visibility over time
Secular tailwinds (demographics, regulation, tech adoption)
Operational improvement opportunities where better management materially moves margins
Technology stability - not betting against disruption risk
Add a sector layer on top, and it is clear: They know where to hunt. Healthcare IT, financial services infrastructure, vertical software.
Note: This is just one of many examples of sourcing models I like.
Why this matters for sourcing
The best GPs don’t chase every “hot deal.” As we’ve seen above, they’re disciplined about where they hunt and build long-term relationships. Track 100 companies in dental roll-ups for five years, and you’ll know which 10 matter. Chase 12 sectors, and you’re just another buyer in the data room.
Some have unique advantages - if you’re HGGC, you’d be crazy not to use Steve Young to get meetings. Who wouldn’t want to meet a Super Bowl MVP? That edge opens doors - but it’s what you do after that counts.
In short, winning GPs don’t wait by the phone. Instead, they:
Maintain live target lists
Check in regularly
Share insights
Make useful introductions
And much more
When a sale process finally opens, they’re not relying on a four-week sprint to trust the numbers - they already trust their inputs because they’ve seen the company execute.
Everyone can build a model; few can fully trust the numbers. The edge is earned years before the data room opens.
Illustration of certainty
The longer a GP has followed a company, the more certain it can be of its numbers. This, by the way, is also the case for LPs who follow a GP for multiple years.
Or put another way - it limits downside risk.
How I test “sourcing edge” as an LP
Note: Not every GP needs to claim a sourcing edge - some funds excel through operational value-add, speed of execution, or sector expertise. But every GP will claim some sourcing edge - here is how I test it.
Let’s start with the red flags, before going to green flags, and what this means for LPs.