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Investors don’t want to meet you. They wanted to be introduced to you

blog.42floors.com

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Re: Investors don’t want to meet you. They wanted to be introduced to you

#31

Post by dnautics »

pg wrote: post #3

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…

Now that YC has worked with at least one nonprofit, do you have any suggestions about how this post might translate to that field?

Re: Investors don’t want to meet you. They wanted to be introduced to you

#32

Post by 001sky »

JoeAltmaier wrote: post #21
cmdkeen wrote: post #12

Earlier quoted context omitted.

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 the…

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…

Warm intros have a built in safety net, too. In a downside, the credibility of the referrer helps to blunt the damage to the VC's reputation. Also, the potential upside from other deals coming through that system, which is lost or diminished by non-investment, offsets the immediate loss. These are some important political dynamics. So, as a result...its not just the "information" efficiency that is at play.

Re: Investors don’t want to meet you. They wanted to be introduced to you

#33

Post by encoderer »

michaelochurch wrote: post #20
pg wrote: post #3

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…

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 ga…

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.

Re: Investors don’t want to meet you. They wanted to be introduced to you

#34

Post by derefr »

JoeAltmaier wrote: post #21
cmdkeen wrote: post #12

Earlier quoted context omitted.

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 the…

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…

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.

Re: Investors don’t want to meet you. They wanted to be introduced to you

#35

Post by davemel37 »

pg wrote: post #3

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…

This applies to all selling situations. Social validation solves the biggest emotional hurdle in selling, "convincing the buyer that they have a defensible position and won't look foolish if they make the purchase."

Re: Investors don’t want to meet you. They wanted to be introduced to you

#36

Post by davemel37 »

pg wrote: post #3

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…

There is a perception issue every consumer asks themselves when encountering a purchase decision, "if you're so smart why aren't you rich?"

This applies to every situation. For investors it's "if you are so good why couldn't you find a way to get someone I trust to vouch for you?"

For a cheap product, it's "if it's so good why is it so cheap?"

If you can't find a way answer the variation of this question in your situation, you will undoubtedly hit a brick wall in selling to that person.

For startup ideas its ," if its such a good idea why doesn't it exist." This is actually why questions like "why now" or "what makes you different" or "how do consumers solve this problem now, without your solution" are commonly asked...

If your so...why aren't you...

Re: Investors don’t want to meet you. They wanted to be introduced to you

#37

Post by MrBuddyCasino »

squidfood wrote: post #28
michaelochurch wrote: post #20

Earlier quoted context omitted.

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 ga…

What? This is no different than any filtering in any domain. Who to hire? What movie to go see? You want someone who personally knows you, whose opinion you trust, to vouch for someone rather than going on a cold guess.

Now this is what I don't get, because usually, that doesn't work. At all. I know from experience that imdb score is a much better predictor of how good a movie will be than a recommendation of a friend, who might have a completely different taste than me. Same with electronics - I know I can make a much more informed decision by doing my own research than most - if not all - people I know, but maybe I just don't know the right people?

Re: Investors don’t want to meet you. They wanted to be introduced to you

#38

Post by wisty »

fearless wrote: post #23
michaelochurch wrote: post #20

Earlier quoted context omitted.

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 ga…

It's not an entirely unreasonable heuristic. The supply of startup pitches is vastly greater than the demand for them. Investors have to filter somehow. Getting a first meeting with any VC is pretty easy, even for someone with no connections whatsoever. There are hundreds of possible paths you can take to get that intro. It's not a big stretch to assume that any entrepreneur with a good chance of success should be ab…

It's also 1000 times harder than playing the national anthem on a recorder. But that's not a very useful filter.

To some extent, being able to work a social network (or cold call a contacts friends, and get them to introduce you) is an advantage to a start-up. But it's not really sufficient, and may not even be necessary (since it's something founders will learn as they go).

If it's an enterprise sales company, it's certainly a requirement though.

Re: Investors don’t want to meet you. They wanted to be introduced to you

#39

Post by beat »

kaa2102 wrote: post #30
michaelochurch wrote: post #20

Earlier quoted context omitted.

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 ga…

This makes me wonder what social network analysis for VCs and start ups would look like. It sounds like this model ensures that the well-connected founders get funded despite the merits of their ideas & implementation efforts.

I don't think it ensures the funding of well-connected founders. It just makes it easier for them. And how do you get to be well-connected, anyway? In a strong meritocracy, previous success is the best. You can become "well connected" by a previous successful (or even unsuccessful) startup, or to be an early employee at multiple successful startups, or to build a reputation on a popular open source project or book or website or etc.

Someone who is well-connected due to their previous successes and demonstrated hard work and talent is a much safer bet. And I'd argue you don't get well-connected just by showing up. That'll buy you a friend or two, but not a network.

Re: Investors don’t want to meet you. They wanted to be introduced to you

#40

Post by beat »

pshin45 wrote: post #16
pg wrote: post #3

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…

Also, what are your thoughts on the implications of this tendency of VCs as it pertains to teams outside the Bay Area or outside the US, who may have just as much talent and hustle but are forced to work that much harder and longer to get the same intros and connections (at the opportunity cost of spending more time on product & customers)? Is there a way to bridge that gap and make the process more equitable in diff…

I think that's a bigger problem for finding angels than finding VC. A little angel seed fund can give a startup enough traction to register with the VCs (and afford a trip or two to Silly Valley). But in Silly Valley itself, angels are easy to find and quick to commit.

Those of us out in flyover country have to deal with no local angels at all, or tire-kicking committees that want traditional 50 page five year business plans and take six months to make up their minds. And I'm sure the situation is far worse in places like India.

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