How Not To Refer A Deal

This is a real-world unchanged transcript of the many useless referrals I and many VCs get on an almost daily basis, courtesy of LinkedIn:

Referer: I have a Client who is seeking to raise $5 Million for his digital media Company in [undisclosed location]. If you or if you know of any of your Clients or peers who would be interested in looking at his Executive Summary and/or PPM, please email me at [undisclosed] Thank you.

Georges: What do you think of the plan?

Referer: I am asking for your help and offering to send the Executive Summary and/or PPM for my Client who is seeking to raise $5 Million for his digital media Company in [undisclosed location].

Georges: Yes, and I am asking you for your opinion.

Referer: My opinion does not count as it is not my money that will exchange hands.

Georges: No, you’re wrong. Your opinion counts as you are referring it.

Referer: My opinion as a friend of my Client is that it is a great concept which guarantees success.

Georges: So are you investing?

Referer: I have $0 to invest. If I help my friend raise the $5 Million, I will be paid. Then I can make my own Investments.

Georges: So why should I even entertain the idea of looking into a referral from someone as unproven as you?

Referer: Ouch! That was mean and rude and unprofessional. Good bye!

No, what is unprofessional is to be mindless about the process of Venture fundraising, here is how:

  • Clearly the referer has not read my website nor does he know anything about me, a bad start. You raise money from investors compatible with your vision and viewpoints, and that means you need to get to know them first.
  • Don’t expect me to take the time to delve into the deal’s potential when you haven’t.
  • You can’t make money as a referer on a contingency of closing unless you have an official broker license (and even then).
  • You can’t expect to make money without adding any particular value in the process.
  • You can’t expect me to take your referral seriously if in more than 10 years in the workforce have not been able to save a dime to put your money where your mouth is.
  • You can’t expect me to take your opinion seriously if you have no credentials to make a judgment on “guaranteed success”
  • The actions of the referer tell volumes about the company in question, both are on my blacklist as of now.

The point is to make sure that as an entrepreneur you are deliberate in your fundraising, that you only use intermediaries that love your business as much as you do and establish a real rapport with potential investors and know their hot buttons. Tossing a deal over the fence is not the way to raise money. I would have preferred for the company (not the referer) to reach me directly because they themselves did their homework on me.

And I have not even put out a shingle that I am interested in investing “off the street”, or under what conditions.

But I do understand that years of subprime investing by VC investors has misled many people to think raising money is just like getting a car loan. It may be for those investors who dole out $250K tranches, but not for somebody who is looking to change the world. Because achieving $1B+ markets takes some serious consideration of all parties involved. If you want to play with the best, act like the best.

So, so long desperado, you deserved this.

Let’s lead the world by example with new rigors of excellence we first and successfully apply to ourselves.

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