Don’t Ask for Introductions to Investors

9/12/11Follow @danshapiro

Raising money is hard, and there’s no way to screw it up faster than going around asking, “Hey, could you introduce me to some investors?” It’s sort of like when, on the second day of school, a goofy freshman asked me if I could introduce him to any girls.

Reason 1: Not every investor is the right investor for you

Asking for introductions to “investors” marks you as someone who doesn’t really know what they’re doing. An investor/company match is very specific, and if you want to find your fit, you’re going to have to figure out what you’re looking for.

Most investors specialize in certain fields. Some will invest in early stage companies, some later. Some will invest in entrepreneurs they’ve just met; some will only invest in people they’ve known for years. Some require a track record and grey hair; some like betting on smart people straight out of college. Some invest big, some small. Some do just a few investments a year, some do hundreds.

Furthermore, investor styles differ. Some give you tons of room to maneuver; some like to work closely with you. Some offer tons of help and advice; others are just about the cash. Some will want regular updates; others don’t like to be bothered.

Before you start looking for investors, figure out what kind of investors you want, and what kind of investors will want you.

Reason 2: It’s lazy and rude

Somebody has to be the matchmaker. That means thinking about your startup, then comparing it to every investor your contact knows and decide if it’s a fit. The right person to do that (or at least take a first pass at it) is you, since you know your company best, and only you know who you’ve already talked to. You do this by researching your contact on Linkedin to figure out who they know, then researching those investors to see who’s a good fit. Check their website, their portfolio, their blog – get a sense of what they look for, and cross them off the list if they already have competing investments.

Sound like a lot of work? It is. That’s why you should do it, not your friend.

Reason 3: They’ll give you a crappy introduction

Asking for an introduction from someone who doesn’t know you well yet never works. If you haven’t pitched your contact and sold them on how awesome you are, there’s no way they are going to convince an investor to take a chance on you. That’s because they’re going to have to tee up the intro, and if the nicest thing they can say about your company is that it “sounds interesting”, the intro isn’t going to go anywhere. You want them super-jazzed about what you’re doing, and more importantly, you want them to be able to deliver a summary of your company in one or two sentences. So give them the pitch and ensure they love it.

Note that this all implies that you can summarize your own company in one or two sentences. This deserves an article of its own. Actually, it deserves a book of its own, and that book is “Made to Stick.” If you’re stuck, go read it. But I digress.

A great investor intro is about conveying enthusiasm. So you need to sell them, then give them simple tools to sell the investor.

The right way

Step 1: Do your homework. Before you meet your contact, have an explicit list of 1-4 people you would like an intro to. And this is definitely about people – it’s better to ask for an intro to Bob Smith than it is to ask for Acme Investors.

Step 2: Pitch your contact first. Treat them like an investor, even if they’re not. Good first-pitch rules apply: don’t teach them; tease them. Show them just enough to get them to want more. Be sure to hammer your one or two line summary a few times so they know it.

Step 3: The ask. Say, “If you wouldn’t mind, I’d really appreciate introductions to A, B, and C. Can I shoot you an email with a one paragraph summary of the business that you can forward along?”

Step 4: The reach. NOW is when you say, “And are there any other investors you can think of that I should be talking to?” You’ve done your homework, they know about your business, it’s OK to ask them to ponder a bit to see if you missed any one. And it’s easy for them to say, “No, your list is great” – you’re not obligating them to come up with any one.

Step 5: Followthrough. Immediately after you step out of the meeting, send separate emails – one for each invitation request – that say something like:

Hello <contact>! Thanks for taking the time to talk today. Your perspective on the business was really helpful. I appreciate you offering to connect us with <investor> – feel free to forward this email to <him/her>. I’m including a brief description of us below.

<<brief description of business>>

Again, do one per investor, so they can easily forward each one to the right person, hopefully along with a little note that says you’re not a bozo.

Fundraising is hard

Look, I’ve been there. Fundraising is daunting. Actually, terrifying. You want to be able to just get it done, so you imagine that it’s possible to just ask around, meet some nice people, wow them with your charm/business plan/demo, and get on with building your company. And sometimes it is.

But it’s usually not. And the teams that invest the most in fundraising seem to have the best results. (Well, the teams with huge traction or great resumes have the best results, but if you’re killing it on those fronts, you’re already cashing investor checks). If you’re a new team with a demo and a dream, you’ve got a lot of work cut out for you.

So don’t shy away from it. Learn your network’s network, ask for smart and specific intros, and you’ll meet your dream investor soon enough. Happy fundraising!

[Editor's Note: This editorial was first posted on Dan Shapiro's entrepreneurship blog.]

Dan Shapiro is the CEO of Robot Turtles, a crowdfunded boardgame that teaches children programming. He previously worked at Google after it acquired his company, Sparkbuy. Follow @danshapiro

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  • http://www,phaserx.com Robert Overell

    Thanks for the thoughtful article Dan, and I agree with much of it. The title of your article is unfortunate since it implies that working through your contacts to reach investors isnt a good idea, since the reverse is true and that was not the main thrust of your article. Venture firms will of course be 10x more likely to respond and take seriously a deal that comes through one of their contacts. I would also say that the main point is not necessarily that the contact “vouch for the deal” and represent it as interesting deal to the VC, but more so that the contact be able to vouch for the people assocaited with the venture.

    Bob