If his reason for turning you down is "it's not my thing," that implies it may be someone else's "thing." Perhaps that someone else is known to him. Not sure why he'd be bent out of shape for an entrepreneur following up with the obvious question: who?
He'd get a lot fewer people asking for referrals if he flat out said "I don't think the idea/team/market/whatever is any good," in which case it would be illogical for an entrepreneur to ask for a referral (or for him to give one, since doing so would cost him credibility).
I like Brad, but sometimes he comes off as a narcissistic princess. If the VC already said 'no', it doesn't hurt at all to ask for a referral, the worst that can happen is they'll again say 'no' or ignore you.
I think he realizes that, while rejecting someone is just an impersonal and inevitable matter of business, refusing to refer someone is a personal insult, and one that can bite a person in the ass later, and he doesn't like being in the difficult position of taking this risk.
The article explains why the VC doesn't want to give the referral, but it doesn't explain how it can hurt me to ask. If you have ever sold something, you know, you have to ask a lot of unlikely people for help before you get any.
Well, it'll hurt your future relationship (should there be one) with the VC, which could be detrimental further down the line if they remember you. Plus, if every VC behaves like this, it'll hurt you because nobody will ever refer you and therefore you waste the few seconds you spent typing out the question.
I can see this from both sides. We are trained as entrepreneurs to ask, ask, ask. If they say no, ask them who might say yes. But if they say no because they're a biotech late-stage VC, and you're after social-web angel funding, so they read your first two sentences and then turned off - what value does a referral really have?
It all comes down to doing your homework, IMO. If someone who should be interested declines, they can probably help you. If you're mass mailing every VC in Silicon Valley and asking for introductions from those who bother to reply to your poorly-targeted pitch, well, you've got a bigger problem than a VC writing a blog post about you.
Well, it'll hurt your future relationship (should there be one) with the VC, which could be detrimental further down the line if they remember you.
Rejection's just a matter of business, but if he refuses to refer you and doesn't have a good reason (e.g. "everyone in my network is interested in biotech, and you're a web startup") he already thinks you're a loser and beneath consideration. At this point, getting his panties in a jam by asking a question he'll find annoying is a (small) benefit.
I agree 100%. His response doesn't make sense from the entrepreneur's perspective. Using his strategy, no one would ever make cold calls because they are annoying to the recipient. But the bottom line is they work enough time to make it worth the effort. In this case there is no downside to the asker. I have no idea if asking for such a referral would ever work but it seems to me this is a good example of nothing ventured nothing gained.
Of course there's a downside to the asker - the VC might actually make the referral. "Hi, I passed on this guy but you might want to take a look at him" is not how you want to go into a first meeting with an investor.
Worse: they could say yes, but poison the referral, ruining your chances with someone that (if you had gotten a different referral) would have invested.
I don't suppose that this effect is large, but it might be noticeable.
Don't think anyone would poison a referral? If someone wasn't impressed by you, they might agree to the referral anyway -- perhaps thinking they are being nice -- but when they tell the third party about you, they say "yeah, this guy didn't impress me, but I promised him I would refer him to you."
I think asking for a referral is an extremely delicate thing in sales as well as raising capital. While you have little to lose from asking for a referral after a rejection, you also have much to gain from pitching this very carefully.
You don't want to come off as implying the VC is wrong to turn you down, consider acknowledging the possibility that your idea isn't ready in the VC's mind before asking for a referral.
"Hey Brad, thanks for your polite note... I get that it isn't right for you to move forward with our team right now. Quite honestly, I value your advice. Is there someone you know who might be able to help us move forward a little more, if not by investing at least by helping us understand where we need to get to and how to proceed? Someone who is perhaps specializing in ventures like ours?
"While we would love to raise money from someone like you right now, if we aren't ready we would appreciate steering us to someone who is in a position to help us sharpen our focus.
This is true, but not for the reasons given in the article. VCs largely follow each other's lead - they're interested in deals that others are interested in.
If one VC refers you to another, but that first one isn't investing, you're automatically damaged goods. You can and should be getting better referrals into investors than that. Entrepreneurs who have made the investor money in the past or are doing well for the investor in the present are the best.
I look at this as a game theory problem. If the number of VC's out there is very large, they are not well-connected, and the number of funding interactions you're going to have over your career is small, then ask away. Who cares if you upset that person? You're never going to deal with them (or their network) again.
If, on the other hand, the number of VC's is limited, they are well-connected to each other, and you plan to ask for funding repeatedly, then how you handle each individual interaction becomes VERY important, because it has a high chance of affecting all of your future interactions.
I find that much of the advice out there on sales and networking is focused on the former case, where the goal is to maximize the chance of a win in the first contact, even at the risk of making an enemy.
I find that much of the advice out there on sales and networking is focused on the former case, where the goal is to maximize the chance of a win in the first contact, even at the risk of making an enemy.
What kind of asshole is going to become an enemy because you asked for an introduction?
In networking seminars, classes and sales conferences
around the world, people are told some version of "if you get rejected by someone, ask them for a referral." This has never worked for me when dating. (After being rejected, I don't recall saying, "I know you aren't interested in me, but do you have any friends that are?") I've never really understood why people think this works in a business context.
It doesn't happen explicitly, but a lot of the time, a person who's already in a relationship (i.e. who will reject the suitor for non-personal reasons) will refer attractive singles to friends.
If a VC rejects me, I'm going to assume that I'm not offering what he's looking to invest in, because the "VCs invest in people, not projects" line is wrong and it's legitimate and expected that a VC will reject people who aren't in his domain. If he refuses to refer me, on the other hand, to someone who might be looking to invest in my project, I'm going to recognize that his ability to judge talent is nil.
" If he refuses to refer me, on the other hand, to someone who might be looking to invest in my project, I'm going to recognize that his ability to judge talent is nil."
Hypothetical: What if your idea and your business plan is a flaming dog pile? Choosing to recognize that it is his ability that is lacking at this point is called arrogance.
I disagree. A VC's job is to determine if he should give you money, not be a personal founder business coach. Isn't that why we would go to him in the first place?
Any information or feedback he gives should be considered a favor and is purely optional on his part.
He'd get a lot fewer people asking for referrals if he flat out said "I don't think the idea/team/market/whatever is any good," in which case it would be illogical for an entrepreneur to ask for a referral (or for him to give one, since doing so would cost him credibility).