Founders are the most valuable part of an investor's network. Responding quickly, saying no clearly, being useful without being asked for credit and behaving well when things go wrong earns their referrals.
9 min read · Level 5
I think the way an investor says no does more for their reputation than the way they say yes. Every founder expects enthusiasm from an investor who is investing; the ones who get a fast, honest, kind no remember it and tell people.
Founders talk to each other about investors constantly. How an investor behaves becomes known.
Behaviours founders remember:
Behaviour Why it matters Responding within days, not weeks founders are managing tight timelines Saying no clearly, with a reason founders can move on and improve Keeping information confidential founders share sensitive plans Double-opt-in introductions respects everyone's time Being useful when it counts hiring, customers, a hard board decision Behaving well when things go wrong the real test of an investor
This applies to founders you do not invest in as much as those you do. A founder you passed on respectfully may start a second company, or introduce you to the best founder they know.
Because founder referrals produce some of the highest-quality deal flow available: pre-screened by someone who has built a company and knows the investor.
Reputation also works in the other direction. Founders increasingly check investors' references before accepting their money.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
A pass that paid off.
An angel passes on a company after two meetings, and sends a note within a week explaining that the market size did not fit their thesis, with one specific concern about customer concentration and an introduction to an investor who focuses on that sector.
The company raises elsewhere. Eighteen months later, its founder introduces the angel to a former colleague starting a company squarely within the angel's thesis, saying: 'They were straight with me when they passed.' The angel leads that round.
Treating founders you pass on as dead ends, or going silent instead of giving a clear answer.
Reply to founders within days, even if the answer is not yet final.
Explain the main reason when you decline.
Ask both sides before making introductions.
Be useful where you genuinely can, including for founders you did not back.
In every interaction with founders, whether or not you invest.
Do not offer detailed feedback where it would breach confidentiality or reveal other companies' information.
Platforms and communities have emerged where founders share experiences of investors, and many founders say publicly that they conduct reference checks on investors before accepting term sheets, asking other founders how investors behaved in difficult periods.
Investors are being referenced by founders as carefully as founders are referenced by investors.
Create a free account to read the rest and apply it to your own investing.