Who to Network With
Your priority should be to network with VC-backed entrepreneurs, who are the best source of intros to investors.
So who should you network with to get great investor intros? Well, introductions are made by other people, so let’s examine our various options:
VC-backed Entrepreneurs
Entrepreneurs are the primary source of high-quality introductions for the simple reason that they are the customer base of early-stage investors. By definition, VCs are looking to deploy capital in startups and to do that they have to convince entrepreneurs to take their money. Thus, founders, who have been funded by a particular VC naturally have influence with that investor and their intros tend to be highly regarded. Of course, the more successful an entrepreneur has been and the more money they made for their investors, the more pull they have.
Executives
Executives in big companies and successful startups can definitely be a good source of introductions.
That’s because, on the one hand, VCs often make it a point to network with such professionals for recruiting purposes or to open doors for their entrepreneurs or to assess new startups. And, on the other hand, executives may naturally touch a significant part of the startup ecosystem - a great example are those in charge of M&A and corp dev, who may acquire the very startups that investors fund.
Of course, that is the same reason it is tricky for entrepreneurs to network with such executives - they may try to sell you on taking corporate VC or one day you may want to talk to them for an acquisition! That is why I think entrepreneurs should be very thoughtful when networking with such folks. An easy way to think about it is the following: if the person you are reaching out to may want their company to lead your round or acquire you one day, it is worth postponing connecting with them until Phase II - Fundraising, essentially treating them as a prospective investor.
Customers and Partners
Your startup’s customers and partners can be a fantastic source of introductions. Just make sure they truly love your company and are well-networked within the VC community.
Lawyers and Other Service Providers
Lawyers and other similar service providers such as CFOs, CPAs, etc. may work with investors on a regular basis, but for the most part they are not a good source of intros because they participate in a different part of the value chain - namely, servicing existing investments rather than sourcing or evaluating new ones.
Investors
During the preparation phase, I advise to avoid networking directly with investors. That’s because every meeting with an investor is essentially a pitch, whether you realize it or not. And there is a place and a time for that - which is during the actual fundraise, as described in Phase II - Fundraising. Until then, it is best to focus your efforts on growing your network with people, who can provide high-quality introductions to investors rather than risk falling into the trap of passive fundraising by talking to investors directly.
Of course, investors can provide introductions to other investors. And they often offer that, so why not take them up on it? As a general rule of thumb, you should never ask other investors for an intro unless they are committed to your company already. The reason should be obvious: if your company is so interesting and exciting, why didn’t the investor making the intro invest themselves? That is why typically such intros are only relevant in Phase III - Closing, where we are building the syndicate once there is a signed term sheet.
One possible exception I have seen is when you have investors, who specialize in significantly different stages or in completely different markets. I don’t advise spending a lot of time on developing such relationships as part of your fundraising preparation efforts - it is simply less effective than the alternatives.
Your Existing Investors
Your existing investors can definitely be a source of high-quality introductions because they are both well-networked and bought-in already. Simply put, they have an incentive to support you in order to increase the value of their own portfolio, which your company is part of.
I suggest talking with them towards the end of your preparation or even the very beginning of your fundraise. That’s because experience shows that even existing investors need to be continuously impressed.
After all, they are investors and are thus managing a portfolio. Unless you have a very special and personal relationship with them, it is best to talk to existing investors when you are very well prepared and have the confidence of many practice sessions behind you.
The beginning of the preparation phase is often choppy, but as with anything it just takes experience - so by the time you have done 50-100 practice pitches you will be ready to be your most confident and convincing self. That will show your startup in the best possible light, which will further inspire your existing investors to root for you.
Hopefully such help materializes. But if it doesn’t and existing investors do not end up supporting you in the way you had hoped or they promised, don’t be too bummed or surprised. I wish I could say that’s rare, but experience shows otherwise. Investors frequently shift their interests, focus on other priorities such as their own fundraising, or even retire or move to another firm, orphaning their startups in the process. I talk a bit about such dynamics in Post-Closing.
Whatever the case, don’t overthink it. Focus on building the best possible company, and then being as prepared as possible when pitching. The rest is not up to you. Remember: you only control inputs, not outputs.