Stop Cold Emailing Investors: The Art and Science of the Warm Intro

In this article, we’ll explore tips and strategies for networking effectively, getting warm introductions, and making your startup a priority for investors.

Introduction

Less than 25% of cold emails get opened, and this number tends to go lower the more you spam people. To stand out, founders need to use human psychology to their advantage while building relationships with investors.

While there are many funds that say that warm intros are not necessary and that everyone has the same chance, the truth is that we are all biased. Homophily is the tendency for people to associate with others who are similar to themselves in various aspects, such as demographics, values, interests, and behaviors. This is one reason why venture capital has usually been white and male and only 2% of venture capital goes to women founders.

VCs, diversity-focused or not, receive countless emails and meeting requests, which can make it difficult for entrepreneurs to get their attention. To stand out, founders should aim to create clear communication and a sense of FOMO (fear of missing out) among investors to maintain top of mind. Here are some recommendations to help you do just that:

1. Do your homework: Identify your target investors

Start by researching how investment funds work, how investors make money, the stage of the fund, and the investment thesis and portfolio of the funds in your industry.

Be specific and target your ideal partners

Before you start networking, it’s important to identify the investors you want to target. Do your research and find investors who have a history of investing in startups like yours. Use resources like CrunchBase, AngelList, Pitchbook, and CB Insights to create a list of criteria to rank these funds. I’d recommend creating your own specific criteria to rank them based on the fund targeted, partner’s experience, connections in your industry, accessibility, and value match. I would recommend you start with the last ranked so you get to practice, when you get to the top of the most aligned investor, you have reps under your belt.

Identify the investors you would want in your cap table. Look for value in investors beyond money and consider the value they can bring beyond financial support.

Diversify your cap table

SoGal, a fund I’m a Limited Partner at, has a Net Promoter Score (NPS) of 9.6 among their founders. That means that founders are happy with the resources and value the managing partners have been providing for them. Hearing from founders directly like Babba Rivera saying that while motherhood and fundraising was hard she was happy to have investors like SoGal on her cap table that would help her navigate that.

But a recent study called “Does Investor Gender Matter for the Success of Female Entrepreneurs? Gender Homophily and the Stigma of Incompetence in Entrepreneurial Finance” has shown that founders that solely rely on having managing partners and funds that are women could hinder the success in further rounds. The recommendation here is to be strategic to have a well-diversified cap table with managing partners that are both male and women, with funds that can help you succeed in further rounds and lead or co-lead a round.

Now that we covered the first step of creating a list of target investors and reaching out to them the next step is to build relationships.

2. Build relationships over network, network, network

The Baader–Meinhof phenomenon or frequency bias

The purpose of networking is to plant a seed of inception in their brains, this is known as the Baader–Meinhof phenomenon or frequency bias, a cognitive bias in which, after noticing something for the first time, there is a tendency to notice it more often. After that first step, the next is to build real human relationships.

I remember a founder who used targeted ads on LinkedIn to get funding by targeting investors of an accelerator he applied to, the ads redirect them to his video application. Brilliant! A great example of the Baader–Meinhof phenomenon. For an investor reviewing thousands of decks, unconsciously something might feel familiar because of this cognitive bias. Even if it’s not the case, in a fund with multiple partners one might be in charge of reviewing your deck and dismiss it, while another could resonate and rally your startup.

Start network online

You can start networking online with a personalized message on LinkedIn or replying to one of their tweets. “Stalk” your potential investors online. They might have a smaller platform they might be trying to grow like IG or Tiktok. In those, your value adds comments don’t go unnoticed in a sea of replies.

Use automations with moderation

CRMs like Breakcold make cheeky icebreakers so you can break the ice, but don’t just automate it and forget it. A misuse of a pronoun or a canned automated message could make you sound robotic, voiceless, and tone-deaf.

As a founder you can use psychology to your advantage and improve your soft skills The Charisma Myth by Olivia Fox Cabane is a great book to start.

3. Have a clear ask, pitch, and message

The purpose of having a clear pitch is to make the investor curious, eager to learn more, and be clear. From your pitch they understand why this problem is so important, why you are the best person to solve it, the objective is to get a meeting.

Perfect your pitch

When you do get the opportunity to pitch to an investor, make sure you have a well-crafted pitch that clearly communicates the value of your startup. You should be able to pitch your startup in under 2 minutes as a normal conversation not solely relying on your deck. Be clear, from the first slide on what your startup is doing, what problem you are solving and what is the solution. A confused mind will always say no.

Cultivate your personal and company’s brand

Be mindful of how you present yourself online and the impression you give, curate accordingly to what is important to you. Better to be true to yourself and get investors that understand what you stood for. Be clear on your values and your company’s values.

Have unshakable confidence

I remember a tale from a mentor when he backed Elon Musk. He only had a couple of weeks of runway but didn’t take terms below what he was asking and he rejected his fund until my mentor gave in to his terms. Not everyone can play hardball negotiation and by no means I’m giving the pointless advice to be like Musk, however it illustrates the clarity of the deal terms he wanted and the unshakable white male confidence.

Create Investor FOMO

The best deals are the ones that don’t seem like they need the funding. They are on an upward trajectory of success with or without the investor. Going to the moon with them or without them.

Those are the deals oversubscribed, deals that move fast and investors have to act quickly to get some allocation. That is investors FOMO.

Fear of missing out is not bad or good, it’s a natural fear we all humans have and we all have made decisions because of this. FOMO fundraising strategy is replicable but you need key players like a rockstar lead investor locked in place, multiple investors interested at the same time, and talking -good- about you. Having a deadline can prompt people to take action in a timely manner, and reduce procrastination.

No one wants to miss the next big thing and the founder has to be the first person to believe they are building the next big thing. If you are still working on getting those key players in place then warm introductions can be very useful and we cover that next.

4. Warm introductions

The best type of referral is an investor that invested in you. The second best referral is a star portfolio founder referring you to their investors. Other types of warm introductions are nice to have but not needle-movers. Here are some tips to ace your warm introductions:

Build relationships before asking for warm referrals

It’s important to build relationships with people before asking for warm referrals. Reach out to investors or other entrepreneurs in your industry and try to build a connection. Attend networking events and participate in online forums to get to know people. Once you’ve built a relationship, you can then ask for a warm introduction.

Be specific about who you want to be introduced to

When asking for a warm referral, be specific about who you want to be introduced to. Don’t just ask for an introduction to “investors” or “VCs.” Instead, be specific about the type of investor you’re looking for, someone who specializes in early-stage startups or someone who has experience in your industry.

Make it easy for the person to refer you

When asking for a warm referral, make it easy for the person to refer you. Provide them with a brief overview of your startup and what you’re looking for. Include a link to your website or a pitch deck on Sendgrid or DocSend. If they end up sharing your deck you will collect those emails and then can reach out on your own. The easier it is for others to refer to you, the more likely they are to do it.

Don’t ask for weak warm intros

Cold messaging could get you better odds honestly. While warm referrals can be helpful, it’s important not to rely solely on them, especially if it’s not really warm. Not warm introductions are for example from an investor that is not investing in you or not moving forward with due diligence, that actually would raise more doubts. In those cases, cold messaging is preferred and can also be effective if done properly with the tips on networking above. Just make sure to personalize your message and explain why you’re reaching out to that particular investor.

Psychological and social science behind the warm intro

My case for warm referrals is due to psychological biases, specifically ingroup bias, which is the tendency for people to favor members of their own group over members of other groups. Even when they absolutely rule themselves by having an operational standard and application basis, there is one way that they even break their own rules. When a managing partner in that fund is already investing in that startup as an angel investor and brings the deal before it closes. In early rounds like Pre-seed and Seed deals move in rapid speed.

The best type of referral is an investor that already invested in you because of the confirmation bias, which is the tendency for people to seek out and interpret information in a way that confirms their existing beliefs and attitudes. As an investor if I get a deal my friends are investing, unconsciously I’m more susceptible to confirm why they are a great startup, team, and so on. On the contrary, as an investor, if I got a deal from an investor that passed on your startup, I would now have the doubt that this might not be a hot deal because this other investor passed. I usually ask other investors why they decided to not invest and I might go into the meeting unconsciously biased. In this case, the confirmation bias might play on the opposite of your side confirming why we shouldn’t invest.

5. Navigating Rejection

Rejection sucks for all but might affect differently based on your gender. According to the 2016 study “Leaning Out: How Negative Recruitment Experiences Shape Women’s Decisions to Compete for Executive Roles” the different way rejection affects could contribute to women’s underrepresentation in top management“.

Doesn’t take a study to realize that men could have more experience with rejection by growing up in a patriarchal society where men are the ones who usually ask women out, grow up being rejected more often and getting back up builds muscle, and anyone can develop it too.

Before fundraising founders need to assess if they are in good health biologically and mentally. Fundraising takes a toll as we are beings who love to be part of a tribe. Rejection derived from fundraising can impact founders’ mental health. “Social rejection increases anger, anxiety, depression, jealousy and sadness”. (APA Psychological Science, 2011).

6. Follow up

After someone has referred you, make sure to follow up promptly. Thank the person for the introduction and provide them with an update on how the meeting went. If the meeting was successful, let them know. If it wasn’t, ask for feedback and suggestions for improvement.

Persistence is key. Keep track of your communication in Notion or Airtable with potential investors and don’t be afraid to follow up if you haven’t heard back. Remember that just because an investor hasn’t said no doesn’t mean they’re interested. Until you have the money in the bank, they’re not your investor.

I use Boomerang, and get the email when someone doesn’t reply. Do it after 7 days, until they reply. And do it in an educated manner. No investor measures the success of their fund by being the most responsive even if they are using Superhuman. So don’t be annoyed if they don’t reply.

Conclusion

In conclusion, while cold emailing investors may seem like an easy and convenient way to gain funding for your startup, it’s not always effective. Warm introductions are much more likely to result in a positive response, as they create a sense of familiarity and trust between you and the investor. It’s important to do your homework, be specific about who you want to target, network effectively, create FOMO, cultivate your personal and company brand, and build strong relationships before asking for warm referrals.

By following these tips, you can make a lasting impression on potential investors and increase your chances of securing funding. I encourage you to put in the effort to cultivate relationships with investors, angels, and players in the ecosystem. Remember, it’s not just about the money; it’s also about finding investors who can add value to your company beyond financial support.