How NOT to Raise Money

I have little experience with raising money. I had done it only once, for a startup that we had shutdown and later restarted with the remaining capital. Yet, I am often asked to help with fundraising. I love helping.

After talking to many entrepreneurs, a common theme emerges. The theme is best illustrated by this incident from a few days ago.

Someone I studied with in university 20 years ago, whom I have not seen afterwards, recently asked me this question (paraphrased from Russian):

“Yo, Fishman, dude, can you introduce me to Vinod Khosla?”

While other similar requests aren’t coming in such a familiar form (which I don’t mind), they do share a common trait: I don’t/barely know them and they ask me to introduce them to local big shots.

Let me clarify that I’ve never met Vinod Khosla and if it’s any indication, he doesn’t follow me on Twitter. However, I often do know the person I’m asked to bridge to. Yet, for me to introduce you to anyone, I first must know you well. So I can vouch for you. In no other circumstances I can make an introduction. Regardless how cool your project is.

Bad Referrals

Let’s roll back in time for a quick story:

Twenty years ago I was assembling PCs at a computer store in Haifa, Israel to cover my room and board expenses. A guy I recently met at the university had told me he was looking for a job. I brought him in for an interview and he started working shortly afterwards.

After about only two weeks, he didn’t show up to work one day. And then the next day. And I didn’t see him in the classroom anymore. He vanished. I wasn’t responsible for it, yet, it forever stained my ability to recommend new recruits to the store. And the store owner was never shy reminding me of it.

Funny side note: I ran into the guy ten years later at a party in Palo Alto. Where he explained that his family made a sudden move to Canada a few weeks after he had started working at the store.

We laughed at it and we’re close friends ever since.

He is an awesome guy.


But back then, he screwed me over while teaching me a valuable lesson.

You are always taking a risk when making an introduction. If the intro is a waste of time, it’ll affect your own reputation, putting your social capital at risk. Do it too often and you are out of the networking game.

The only way to mitigate that risk is to know both parties well to ensure it is indeed a valuable match.

Two Paragraphs Test

At the early phase of your project, everything depends on you, the founder. Nothing else matters. Your pitch deck isn’t enough to assess your ethics, commitment, your ability to attract talent, lead the team or handle a crisis.

You can not showcase these skills in a 30 minutes Skype call. Your self-selling statements peppered with todays’ buzzwords won’t establish your credibility.

“I’m a future thinking kinda guy, building a VR enabling IoT. Main focus is AI based on deep learning of big data”

It often just does the exact opposite.

If I cannot vouch for you, what do you want me to say to Mr. Khosla? Here is a dude I met recently/20-years-ago, he is working on a cool project? What do you think Mr. Khosla will do? Drop everything and call you? What do you think it will do to my credibility as a connector?

However, if you do possess the above qualities, plenty of people should be able to attest to it. Those are the people in your network, people you worked with before. Only they can make meaningful and valuable intros for you. Everything else is noise. Asking a random person to introduce you is asking them to add more noise to a system of already low signal-to-noise ratio.

And if someone agrees to introduce you without writing two meaningful paragraphs about you, then chances are, you won’t see any benefit from that intro. As their intros are rarely taken seriously anyways.

My friends lose their recommendation-privileges after 3 poor restaurant suggestions. If I ever get there, I won’t want to lose my introduction-privileges with Mr. Khosla.

Good Referrals

Research the person you are looking to be introduced to. Then, find the best person in your network that can connect the dots for you. The connector should already know you well, so don’t sell yourself. Instead, sell them the benefits both sides may reap in case of a successful match. Your connector will be happy to take the credit for a great match and gladly intro you.

Work through your network. Don’t skip a step, as you may trip.

PS: A must-read article about art and etiquette of intros.

EDIT: My next blogpost on the topic of fundraising.

Alex Fishman is a Founder/CEO of Bugsee — a debugging tool for developers. Bugsee lets developers watch videos leading up to crashes and bugs. Check out Bugsee explainer videos for iOS and Android and Web, or our Demo.
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