Some years ago I saw a well-known1 investor on Twitter say, in effect, that if he decided not to invest in you, don’t ask for referrals.
From an investor’s perspective, this often makes perfect sense. Great investors place their money with people they believe will succeed, and perhaps there were so many red flags the investor couldn’t possibly recommend the entrepreneur to anyone.
If the investor is talking to the entrepreneur in the first place, however, it probably means they passed some kind of initial screen: they aren’t completely out there. There are countless stories where investors declined entrepreneurs early on like multiple decacorn company builders Dorsey and Musk.
Don Valentine did not initially invest in Apple2. Instead, he referred Mike Markkula to Steve Jobs. Markkula invested first, then Valentine invested with Sequoia a year later. Can you imagine if Don Valentine simply brushed them off and said no? I may not be talking about Don Valentine right now, for one.
Most venture capital firms have an investment thesis that is procured to their LPs. Angel and seed investors have their own verticals and criteria for investing. The narrow scope of these theses precludes at least some power law wins. After all, I know of no thesis that is, “Invest only in companies that will go public.”
“I have traction on my college social network” “We are a B2B outfit.”
“I have an idea for an electric car.” “Oh, we only invest in software.”
A great investor will try to help in some way. They may know someone in their network who has a completely different perspective. If that person invests they can turn around and reason with the first investor, or the first investor can still have a way in to the next round. It’s also just good business.