Venture Capital/Opinion/

Why investors need to stop taking ‘warm’ intros

There’s a fairer, more transparent and much more productive way of doing things.

By Sarah Turner

I’m an angel investor with a modest public profile as cofounder of Angel Academe. I can’t begin to imagine what it’s like for ‘famous’ investors but, on a normal day, I’ve received five introductions to founders looking for investment before breakfast.

Some introductions come through LinkedIn, others directly into my email inbox. The vast majority are introductions from people who I may have connected with at some point or have my email address somehow, but aren’t people who I know well enough to consider part of my trusted network.

Most of the people who are in my trusted network, so in a position to make warm intros, don’t. They know that the best way into the Angel Academe pipeline (and onto my radar) is via our application form. They might mention that they’ve recommended someone apply, but I’m eternally grateful that I don’t have to send yet another email linking to our application form.

The lure of the warm intro

I do understand the value of genuine warm intros for many investors. If an intro comes from someone who you’ve invested with, or from entrepreneurs you’ve invested in, or very close contacts, it can save you a hell of a lot of time. They’re likely to understand exactly what you’re looking for and have prepped their contact accordingly. Their own credibility depends on the quality of their intros, so it’s a virtuous circle.

But these trust networks are by definition small, so the danger is that you only see opportunities from a limited number of already well-connected founders. And less well-connected founders can waste a lot of time trying to find someone to introduce them who may not be a close contact at all. Research by Diversity VC shows that women are less likely than men to be able to get warm intros in the first place and, even when they do, are less likely than men to benefit from them.

The only fair and transparent way is to use an application form.

At Angel Academe, we believe that the only fair and transparent way is to use an application form. Yes, it’s a lot of work to review all the applications, but a well-designed form can get you to the data points you need very quickly. We use it as a productivity tool which is important for us as a very small team with a lot of incoming dealflow. A managed process is easier to communicate and automate and tasks can be batched and tracked more easily than random incoming emails and social media messages. It helps us get the information we need on first contact so we can focus on the opportunities that are right for our investors. 

But most importantly, our selection process levels the playing field for everyone as they have to use the same front door. It eliminates our unconscious tendency to make snap judgements based on accent, location, skin colour or who they know.

We read and respond to every application and founders who make it onto a screening call get to workshop their pitch with several angel investors and receive feedback afterwards. 

The next gem of an opportunity might come out of left field rather than via your mate.

It may be that the best opportunities will still come from founders referred by someone from your inner circle, but a more defined and accessible process will confirm that objectively. And you never know, the next gem of an opportunity might come out of left field rather than via your mate. And it’s the gems we’re looking for, right?

Tips for application forms

There are hundreds of examples you can learn from, but there are a few things worth thinking about:

1. Help potential applicants know if they should apply — clearly communicate your criteria 

2. Make your form easy to complete (and read) — set word limits so applicants know how much detail is required

3. Respect people’s time — gather the information you need, but no more

4. Focus on the data points that really matter — what the business or individual has achieved

5. Commit to reading applications and responding — even if it’s a generic thanks, but no thanks

Sarah Turner is cofounder and CEO of angel investor network Angel Academe. 

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Dagge
Dagge

That is a great and realistic attitude

Cedric Torossian
Cedric Torossian

Sarah- Thanks for raising indirectly an important issue: the noise of propositions hitting investors inbox. But why being binary and not do both? I do warm intros to my investor networks using edited 250 words exec summaries. We also have many female & BAME founders that we introduce that way, so really I cannot see any discrimination through our process. Investors like this because it takes them one minute to know if they want to hear more or not about one or several propositions in one email …If anything application forms are something we and many founders keep away from… Read more »

Robin Brownsell
Robin Brownsell

Sarah – I like using warm introductions because the challenge of searching for an investor sucks up far too much time. Might I also suggest the Angel Community/VC community agree on a common application form and style and make it clear what markets they like, how much dry powder they have and be honest in their capacity to respond .

Dagge
Dagge

I think that looking for warm introductions is discriminatory because only the most connected get introduced, and not the most promising ones. ‘Rich are getting richer and poor remain poor’