I was in a meeting the other day with an experienced investment banker. He was helping me with a client situation when the term “Warm Referral” came up. It seems innocent enough. A warm referral comes from a person who knows you. This person introduces you to an investor or other influential party. Because of the introduction, you get the meeting.
The thing to understand is how valuable that referral really is. For many serious investors, receiving 10 deals a week is not out of the ordinary. A warm referral many times will translate to your deal moving to the top of the pile. Even better, you are much more likely to actually get a face-to-face meeting. Make sure you seek out as many of these warm referrals as you can.
Getting a warm referral is about more than just asking. You very well may need to present your concept to the person you are asking to provide the referral. If you are asking to be referred to a specific person, resist just making a direct cold ask. Try inquiring about the investor’s preferences in evaluating a deal. Ask what the particular investor looks for in a deal. Ask if the person invests frequently. Get to know as much as you can about the investor. Most people who will give referrals want to know if you are the right person to refer. Referrals are a two way street and bad referrals tend to burn the investor out.
Make sure you show the person you are asking for the referral that you are a worth while venture and that you appreciate their effort.