Zach Ware

Why investors prefer intros (from an investor who gets a lot of email)

Elizabeth Yin is a Partner at 500 Startups where she leads the Mountain View accelerator. She also founded and sold a company called LaunchBit. We were investors.

I met Elizabeth four years ago via an intro from a personal friend. We invested not long after our meeting.

Elizabeth has written two must-read blog posts for startup founders in the last week: How to ask for an investor intro? and Who is the best person to ask for an investor intro? Go read them, I’ll wait.

I have first-hand experience in her thinking. She did exactly as her posts explain when she introduced me to Jonathan Manzi and his company Ink a few months ago. Her email included a summary of the company, why she was emailing (the company wanted an intro because of a past investment of ours) and said “let me know if you want an intro.” Side note: never introduce two people who don’t know each other via a blind intro…it really sucks…use the double opt-in intro.

At first, it appeared to be a weird connection. I couldn’t understand why she thought we were a fit for each other. But because I know her and trust her judgment, I took the meeting.

Twenty minutes into the call with Jonathan I was excited. The thirty-minute call lasted well over an hour. I completely nerded out. My partner Will had a similar experience. And a few weeks later we invested. We tell everyone we meet about them.

Prioritizing your time as a venture investor is one of the hardest aspects of the work. On one hand you want to meet everyone you can. It’s fun. People are awesome. Some of the meetings may lead to investments or something else exciting. Either way, you’ll probably learn something from them.

On the other you need to spend time working with your existing portfolio and doing your part to help them become great companies. It’s hard to do both.

We are operationally-focused investors. We invest in a specific area that matches our skills. We choose to prioritize our time towards work that can directly contribute to our portfolio companies’ success. 99% of our contribution is work, 1% is capital.

This means we’re working on intensely cerebral problems very frequently. We’re helping write job descriptions. We’re helping solve multi-channel distribution challenges. We’re analyzing acquisition funnel data. In other words, we’re doing things.

If I take a meeting with everyone who emails me, that’s time (and cognitive load) I’m not devoting to helping a portfolio company. The compounded opportunity cost of that decision is immense. And meeting with a new founder if I know it’s not going to lead to an investment is disrespectful.

Our historical investment data shows that all of our strong and growing investments came via intros from people we know. And all of our investments that came via unsolicited pitches ended badly and the bad usually came about quickly. The data shows us that trying to manage that inbound provides a net negative return. So we don’t do it anymore.

But if someone I know takes the time to make an introduction, that vote of confidence carries significant weight. It’s like dating. The intro is a signal that the other person isn’t bat shit crazy.

A bias towards intros can be misread as supportive of a good ole boys club, that it makes it harder to become a founder for the less “connected.” I get that perspective. I also think it’s wrong.

Why does an intro matter? It demonstrates that somewhere along the way you’ve forged a relationship with another human about your company. If you are an early-stage company and/or a first-time founder, it demonstrates that you have sought advice from someone more experienced than you. It says a lot about how you think.

You may not have an intro path to every investor, but if you are a first-time founder you should be spending time with mentors. If those mentors have experience in any type of company building, they know potential investors. They know at least one who would be willing to take a chance on you, even at a small level. Over time, you’ll find your way to intros to larger investors.

Your first check might not be $1M and, frankly, it probably shouldn’t be. But I can tell you, from both sides of the table, that if you build genuine relationships that aren’t based on money, with people who help make you a stronger founder, those people will go to work for you and get you great investor meetings.

If you don’t know a potential mentor, find a successful founder on LinkedIn and message them, keep it short. Ask them real questions. They were in your position once too.

And, as in the example of Ink, an investor will be much more likely to take a meeting, even if the fit isn’t immediately clear, because she trusts the person making the intro. More importantly, the investor’s mindset during the meeting will much more open.

Your founder time is the most valuable resource your company has. Spend it wisely.

First published on March 9, 2016