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VC funding: Why it’s time to end warm introductions

I am eternally grateful to the investor who gave us a chance on a cold email. Unfortunately, there are too few investors out there willing to do so.

VC funding: Why it’s time to end warm introductions
Cytonn Photography/Unsplash; Markus Winkler/Unsplash; Sharon McCutcheon/Unsplash
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It was 2016. My company was in its third full year of operation. It was an exciting time—we were growing, figuring out key processes, and gaining brand recognition in the market. But we were running into an issue: The amount of money we needed to raise to achieve the next level of growth made it difficult to reach out to angel investors as we had done before. We need to raise venture capital funding. Anyone who has raised VC funding knows that the key to access is the “warm introduction”—an introduction by someone who knows the VC funder professionally.

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I began as any founder would, asking various angel investors and other founders if there were people they could introduce me to. Unfortunately, our investors didn’t have connections to venture capital firms, and other founders were in the same boat as me. As our financial runway continued to shrink, anxiety set in as I realized that I hadn’t made any headway toward introductions, let alone actual meetings. Out of desperation, I began Googling for information on how to break into venture capital’s walled garden.

That’s when I started to read the disheartening statistics around venture funding. Only 1% of all companies funded by VC are led by Black founders. The statistic hit me like a ton of bricks. After overcoming the seemingly impossible by taking an idea and growing it into a business—despite no personal or family funding to commit to its growth—I was met with the stark realization that, like many Black and Brown founders, a lack of access to this exclusive network could mean the end of my dream.

Just as I was at my lowest point, I came across a blog post written for people in my position. The author discussed VC’s walled garden and how many—if not most—VCs have a reputation for only entertaining introductions from their networks. This post, however, was for the rest of us. It began by recognizing that yes, there’s maybe only a 1% chance that you get VC funding through the cold introduction route (cold emails, phone calls, etc.). But at the end of the day, 1% still means there’s a chance, right? It then linked to a spreadsheet showing all the micro VCs in the United States, followed by information on how best to draft a cold email that stands a chance of getting a response.

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Over the next couple of months, I stayed home from the office, preferring to focus exclusively on making this treacherous journey succeed. I differentiated the edtech (or similar) micro VCs from the others and found interesting information about each one. I then drafted a templated email and customized it to each investor willing to accept a cold email. In the end, I sent cold introductions to 97 different funds. Twenty-five replied, and 10 agreed to meet with me. In the end, none invested, but one investor, in particular, found what we were doing interesting enough to share with another investment fund.

With that one warm introduction, not only did we secure our lead investor; we secured follow-on investors, ultimately closing a $1.5 million seed round and an additional $500,000 in grant funding.

I am eternally grateful to the investor who gave us a chance on a cold email. Unfortunately, there are too few investors out there willing to do so. These decisions have adverse consequences not only regarding who gets funded, but ultimately which communities see the benefit of technological innovation.

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IT’S TIME TO END WARM INTRODUCTIONS

This idea isn’t mine alone. Funders of color throughout the space have argued for this, highlighting stories of founders like me who find themselves on the outside looking in. In today’s age, where many funds and firms are thinking about how they can become more inclusive, this one simple change can do so much to quickly level the playing field and truly increase the percentage of VC-funded people of color.


Co-founder & CEO of Upswing. Advocate for decreasing the wage gap via economic freedom. Lives in Austin with his wife Janna and pup Journey.