VC Mythbusters: Reaching out to, and getting introductions from, Investors
I want to debunk two myths about startup fundraising that especially impact founders with limited connections in the VC community. I’ll flag that I’m looking at this through the lens of a consumer pre-seed and seed investor. The myths are:
- Don’t cold email investors, only rely on warm introductions
- If an investor passes, but offers to connect you with other investors, don’t accept because it is bad signaling
Why you should feel comfortable sending an ice cold email to investors
The argument against reaching out to investors cold is two-fold. First, investors are more likely to pay you attention if they hear about your startup through a channel (person) they trust. Second, even if you don’t have any shared connections with an investor, you should demonstrate the hustle and ability to burrow your way into their network.
My counter-argument for why you should feel comfortable reaching out to investors without a warm introduction: it makes me better at my job!
A major driver of inequity in venture funding is that the venture capital community is so homogenous, with allocators of capital largely coming from the same ethnic, socioeconomic and academic backgrounds. When investors rely on their network for deal flow, the lack of diversity in founders receiving capital is self-propagating.
The reason I appreciate getting cold emails from founders is because it makes me better at my job. The broader reach I can have, and the more diverse the founders I can meet, the more successful I will be in finding great companies to work with. If I was looking for a romantic partner, would I insist that they come via a warm introduction?
Incidentally, one of the last investments we made came via a cold LinkedIn message (shout-out to Sashee at Tea Drops!).
Why you should welcome investor introductions from investors who aren’t investing in you
The argument against accepting introductions from an investor who has passed is that investors are sheep, and even a warm introduction between friendly VCs is problematic because the investor receiving the introduction won’t be able to get past the fact that the other investor passed.
I’m not here to dispel the belief that many investors are sheep, that happens to be true. But, I’d argue that the sheeplike behavior is most prominent in investors’ tendency to try to pile into deals when a well-known investor is leading, as opposed to not giving the time of day to a company that another investor has passed on. There are so many reasons why a fund might pass on investing in your startup (besides them just not liking it): there may be a competitive conflict, your business may be too early or too far along for their typical investment entry point, they may be coming to the end of their fund, they may be trying to diversify outside the space you’re in, etc.
A caveat here is that I’m saying you should “welcome” offers of introductions from an investor who is passing, not necessarily request introductions. You only want enthusiastic investors making introductions. If an investor has passed, I wouldn’t ask them for introductions to other investors because a tepid email from an investor asking if a peer would like to connect with you is not helpful.
But, if an investor passes and says they’d love to reach out to x, y and z investor because it could be in their wheelhouse then I think you should take it. Think about their motivations. In all likelihood, they want to help you either because 1) they know someone who could be a better fit, and they want to share promising investment opportunities with that investor so that investor returns the favor down the road or 2) they like what you’re doing, maybe it’s too early or too late stage, but they want to stay in your good graces and help now so they could be in a good position to invest in a future round.
In related news, my inbox is open! hayden.williams@brandproject.com
