
Investors don’t want to meet you. They wanted to be introduced to you - jaf12duke
http://blog.42floors.com/investors-dont-want-meet-wanted-introduced/
======
pg
I'm impressed with Jason's posts. He seems to be methodically working through
all the misconceptions of inexperienced founders. This is an important and
subtle one. Investors assume that if they're hearing about you first from you,
you can't be any good. If you were good, they'd already have heard about you,
because you'd have found a way to get introduced to them by someone they
trust.

Even if investors didn't start out with this bias, they'd soon learn it from
experience.

~~~
michaelochurch
_Investors assume that if they 're hearing about you first from you, you can't
be any good. If you were good, they'd already have heard about you, because
you'd have found a way to get introduced to them by someone they trust._

So you're admitting that they're social-proof whores who refuse to think for
themselves, even about the subject matter of their own jobs?

VCs should be mortally _humiliated_ by the fact that the game they're running
is, after all is counted, a feudal reputation economy-- all flashes, no
substance.

Yet people are surprised that VC, as an asset class, has been a stinker for
the past 13 years.

~~~
encoderer
Turns out most men are social proof whores. They are much more likely to date
somebody who has been introduced to them by a friend they trust.

Oh, and women too.

C'mon. Weak argument here man. Newsflash: We trust the people that... we
trust.

~~~
001sky
_Weak argument here man_

You're explaing why people are basically racist and xenophobic. Congrats.
Unfortunaely, this makes your posture politically untenable / incorrect and
dangerous. It also paints VCs with guilt by association. Because, ya know
what? they are certainly sexist and racist based upon the data. Unfortunately.
Bad news for this argument is tha VC cash comes from Public Pension funds and
other LPs which politically cannot support such institutionalized _bias_
against protected classes. Of course, the loophole is that VCs are not
employers. So they are legally entitled to be as rascist, mysoginistic, and
otherwise discriminatory as they damn well please. But don't go around
publicising it.

~~~
encoderer
Uhh.... Sure?

Suffice to say I find your comments so absurd that they don't even merit a
rebuttal. Consider yours the last word, congrats.

~~~
001sky
Its no more absurd then the appeal to authority from _dating advice_. Because
if you look at the quantitative analytics on dating, they are pretty strong.
They show rampant/pervasive casual racism and obvious self-segregation. The
value of trust should not be underestimated, but if you're not going to go
through the bother of thinking through the implications you need to hedge any
sweeping proclamations.

------
AndrewKemendo
Ooh, this one is really good. Also heartbreaking as someone who invested a TON
of time into making personal investment calls. I definitely learned this one
the hard way.

One thing that I would add also is that investors don't seem to want to be
introduced to you by their non-investor/non-business contacts, so their
friends and acquaintances. I learned this one also because I figured that
would be a good approach. What seems to happen in this case is the "stink" on
you gets transferred to the intermediary and the investor picks up on it.

------
lquist
_If you’re working in any startup hub, you almost certainly have friends that
are working on their own startups. Ask them to help you. The first question
should be, “Am I ready to fundraise?”_

I would actually phrase this another way, "Be honest with me: If I asked you
to refer me to one of your investors, would you recommend me to him/her or is
my startup not there yet?"

~~~
ericabiz
As someone who, like the OP, is often on the other side of that conversation
(I've helped startups raise seed funding and get into accelerators), here are
a couple tips:

1) Be specific. Which investor do you want an intro to, and why? I know my
investors well. Some of them love meeting early-stage startups. With others,
you are wasting your time unless you've already raised significant capital.
Other times I can't help at all (recently got asked for an intro by a B2C
company--I know my investors from a B2B perspective since that's where my
company is, and I'm not sure who would be a best fit for a B2C company.)

2) Be real. If you don't have any customers/pipeline, traction, or even a
working demo, you're not ready for investment. For some reason there tends to
be a pervasive belief that a "napkin idea" can get funded. Maybe 1% of the
time, that's true. But even with a previous exit under my belt, I still had to
have some form of traction before I got investors onboard. If you have nothing
except an idea, please feel free to ask for advice, but don't ask for advice
on looking for investors, because I'm going to tell you to focus on traction
first.

~~~
DenisM
As it was explained to me, amount of prep work you must do varies by your
credibility:

\- First-time founder has to show traction.

\- With a handful of successful startups under the belt, one can make do with
a good powerpoint, a prototype and some customer interviews.

\- With a long streak of victories, a napkin is just fine.

Ergo if you're not Steve Jobs, you can't get away with a napkin.

------
JoeAltmaier
Argues its impossible to find the needle in the haystack, so VCs use other
founders to sift the chaff.

But a VC was quoted that they funded zero cold contacts. That doesn't sound
like its hard; it sounds they're incapable of evaluating cold contacts at all.
I'm guessing they use contacts for their expertise, because VCs lack any.

~~~
cmdkeen
Why would they run the risk if they have enough warm leads from trusted
contacts? The VC money to startup lead ratio is obviously one sided to present
sufficient profit motive to invest in cold introductions. If the VC market
becomes sufficiently in favour of warmly introduced startups that there is
profit motivation in investing in those startups that cannot garner warm
introductions then someone will do it. But they will be assuming much greater
risk.

~~~
JoeAltmaier
The ecosystem changes: sometimes leads are scarce; sometimes plentiful. That
can't explain never, ever investing in cold contacts.

Risk can be mitigated by doing some diligence. It sounds to me like the only
diligence VCs do (are capable of?) is "what does some other smart guy think?"

I'm not trying to paint VCs as incapable, but this story makes it so likely.
Zero cold contacts invested in? Zero ability to evaluate leads on their own?
That's pretty damning.

~~~
derefr
You're missing a third category here. "Cold contact" implies that the startup
contacts _them_. I imagine the really-smart VCs are going out, doing
research/watching the market, and cold-contacting _the startups_ , with nobody
having reached out to them first.

------
soneca
So is it the same meritocracy(1) of being accepted on a top university?

(1)
[http://www.justiceharvard.org/2011/02/episode-08/](http://www.justiceharvard.org/2011/02/episode-08/)

~~~
jamesaguilar
Possibly so. People have limited time to process evidence to come to a
decision. So they seek out the types of evidence that provide stronger
signals. That may cause some false negatives, but since you know it now,
that's pretty much your problem. No one owes you an investment in your
startup.

(I think this is far less of a problem than access to education, as someone in
the position of founding a startup is already on a very high tier of agency
and privilege compared to the vast swath of society. Also, you're "born with"
connections to startup founders at a far lower rate than you are born with
connections to universities, in general.)

Great link, though, thanks!

------
tsumnia
As someone on the East Coast, I feel this is the main reason everyone wants to
immediately leave our town to go to the West. We have plenty of VC's around
our area, but the network hasn't been built so only the very high up know
anyone.

------
jb007
Forget about investors. Bootstrap your Company. When you are successful, don't
mind them. They like to reap where they have not sown.

------
littlecritter
I was at an event with VC Peter Thiel (founders fund) over the weekend.
Someone asked him to contribute to a charitable event during the Q&A. He made
the point clear: If you want me to do something for you, come through a
trusted friend. I only invest personally if you've been recommended by a
trusted friend.

------
ig1
I think Jason is overly focusing on one side of the relationship (i.e between
the startup and the introducer) when I'd argue in actuality a lot of the value
of the introduction depends on how well placed the introducer is to evaluate
you.

For example I would rank introducers as:

1) People who are superstars in your field (i.e Peter Thiel if you're a
payments startup) or have great track-records in backing super-star companies
across fields.

2) People who are experts in their field and the VC trusts. For example if
you're in an adjacent space to a current portfolio company, getting an
introduction from that portco (or even a reputable non-portco) carries a lot
of weight. Or investors who have a track record in your field.

3) People who are customers of your product and the VC trusts. If your
customers are gushing about you that makes for a great intro, if a portco
emails their VC saying "there's this product that we use and love and the
company is raising money" that'll get attention.

4) People who are well placed to evaluate your product/startup and have some
relationship with the VC. Similar to (2)/(3) but they don't have to have a
strong relationship with the VC. The VC trusts them because of their expertise
not because of their relationship.

5) People who are well positioned to evaluate you and your team personally and
the VC trusts. So for example people you've worked with in the past who will
personally vouch for you.

Below that you basically have introductions from people who (a) Aren't in a
position to evaluate your business and (b) Aren't in a position to evaluate
your team. So it's basically a case of "we met these guys the other day and
they seemed smart and had a nice demo" \- i.e. the VC might spend a bit of
extra time looking at it as a favour to the introducer but it's unlikely to be
significantly better than meeting at an event, etc.

At that level a bunch of other factors come into play. If an investor is
super-into your space or if you've got a strong resume/team they'll likely
look at you regardless of how you came to their attention.

------
graycat
> This is an important and subtle one. Investors assume that if they're
> hearing about you first from you, you can't be any good. If you were good,
> they'd already have heard about you, because you'd have found a way to get
> introduced to them by someone they trust.

Yes, the investors do "assume", but, for information technology investing,
their ROI for the past 10 years sucks (details in a Fred Wilson blog).

VCs don't know the right people to know a significant fraction of people who
are really "good". A really "good" startup entrepreneur likely won't know
anyone a VC will "trust".

If a VC can't evaluate my work from what I write, then they won't be able to
be effective on my Board; I won't be able to hope to be successful with them
on my Board; and I won't be able to have them on my Board or have them invest.

I want to be successful in business, but on average VCs are not very
successful. Khosla had some recent, sharp remarks on VCs.

------
brosco45
It's not what you know, but who you know.

~~~
gms7777
Its not who you know, but who they know.

~~~
martywm
Its not who you know, but how they know you.

~~~
joshfraser
It's not what you know, but how you think

~~~
Snowda
It's not what you know, but how who you know, know, know how you think.

------
lquist
_another top tier VC once told me that out of the thousands of business
pitches he receives in his office every year, his firm has never funded one
that came in completely cold._

Referring to Chris Sacca
([http://lowercasecapital.com/prospecting/](http://lowercasecapital.com/prospecting/))
perhaps?

~~~
dm8
Majority of VCs/investors (particularly in the bay area) don't give
significant importance to cold approach. Lot of savvy founders are aware of
this.

------
graycat
Investors can want whatever the heck they want, but wanting is not getting.

I know plenty of people high up in US business and academic research, but
those people and the VCs don't know each other.

VCs and I don't know the same people.

Bluntly, the VCs are a bit below my 'circle' of business acquaintances.

In particular, the fraction of VCs I would hire into my company is tiny, so
small to be nearly invisible. Why? Because their technical qualifications in
information technology, etc. in a word suck.

I mean, would you hire a VC? For what, _BizDev_? What if a VC gave you advice
on how to invest your IRA?

How many VCs can code, productively with today's technology? How about be a
system administrator for a high end server farm or network?

"The single most important decision you will ever make is with whom to do
business."

Extra credit for the source.

------
vinceguidry
This is the sort of thing you need to be aware of, in all areas of life, if
you want to be successful. People have filters, and you're fighting a stupid,
uphill battle if you want to get through them. Spend that time going around
them. It doesn't matter if you're looking for funding from that top firm, a
date with that gorgeous woman, a job in that blue-chip, or a visa to visit a
post-Soviet wonderland.

Everything worth having comes from others, and a confrontational attitude is
the worst one, if you're trying to get through filters, that's how they
perceive you. If at any time it feels like you're beating your head against a
wall, that's because you are. Take a step back and figure out what you're
doing wrong.

------
phylosopher
Thank you Jason. I direct a not-for-profit foreign government and private
foundation incubator based in San Francisco. We just completed a one-month
quasi-accelerator for companies that came to the US. None were ready for VC
funding and we made this clear. Despite our best effort to get the
entrepreneurs to focus on customer development, many spent their time on VCs
and angel networks. They got meetings but not much else. We are going to make
sure that all new companies participating in future accelerators read your
post.

------
speeder
This leads me to the question: How you get networked with people that know
investors, when your startup is in a non-hub place? (like, not in United
States or Europe)

------
avifreedman
Another thing you can do if you are are a practitioner in a particular domain
is to let your vendors and partners know that you're open to doing due
diligence calls on their behalf. Then if you do take a call, be circumspect
but honest in your advice/feedback.

That can be great for building your network for the day when you might want
funding, advice, or 3rd party intros.

------
jseban
So many hoops you have to jump through to "do a startup" (I want to
differentiate between starting your own company).

It's starting to look like less freedom and more BS compared to working for
BigCo.

------
graycat
The actual sense of the title of this thread is just not true. My experience
is that plenty of information technology (IT) VCs are plenty eager to talk
seriously without any introduction except an e-mail from a startup founder.

What I learned, to my great surprise, is that apparently the VCs are under
some quite severe constraints. So, they are forced, from whatever, to ignore
essentially everything about a project I learned doing projects in business,
academic research, and for the US DoD.

Instead, for an IT project they want to see, as about the second thing, some
running software. That there might be a lot of crucial work before such
software, work that makes the software itself trivial, just is not in their
experience and is nearly always way beyond their nearly always rather meager
technical backgrounds.

So, for the running software, they want to "play with it", likely essentially
to look at the user interface (UI) and estimate how well many users will like
it.

For more, they want to see some forms of 'traction' which apparently they use
as a surrogate for accounting data traditional in commercial bank lending or
private equity investing.

For a deeper look, they like simplistic 'patterns' based on past history of IT
VC taken fairly narrowly. So, they have a fundamental problem seeing or
evaluating something that is really new, even if, say, the US DoD problem
sponsors could see the power and value.

So, I have a list of 40+ VCs eager to "play with" my software when it goes
live. I got an introduction to none of them and for each of them just sent
e-mail. They responded with e-mail and at least one phone conversation. They
are impressed enough with the 'market', the 'technology' to the (meager)
extent they and value it, and the goals. Then they just want to see it
working, hopefully also with 'traction'. How much? One VC firm said 100,000
unique users a month. With my site that might be $12,800 a month in revenue at
which time, with my low 'burn rate' of a sole proprietor solo founder, I
should be on a nice path of 'organic' growth and still 100% owner.

Yes, my situation is not 'standard', but neither are successes in the VC
business.

The VCs need to learn how to look at and reliably evaluate work that is new,
typically just on paper; US research academics and high end US DoD problem
sponsors can; VCs cannot. So far maybe that lapse has not much hurt them. But,
generally, gotta tell you, the VCs are way, way behind the _leading edge_ of
US science, technology, and entrepreneurship.

------
michaelochurch
Not to kill the messenger-- OP is right-- but that "only our kind, dear"
stance is an arrogant attitude for people who are spending _other people 's
fucking money_.

Fuck all of those emasculated half-men who can't bite down on a decision
themselves, but must slurp down the pre-chewed, half-digested chyme of social
proof.

I could say a lot more but it's already obvious where the good people stand.

