Effective Networking Isn't as Hard as You Think: How to Make Valuable Connections

By James Ahern

Networking can get a bad rap, with the word bringing back the horror of having to make small talk at awkward events. However, at its core, effective networking is simply a case of identifying and forming mutually beneficial relationships.

Some aspects of networking are specific to investors, whereas others are particularly relevant to entrepreneurs and business founders. However, the two groups share one thing in common: they need each other to thrive. They are (or should be) looking for that new relationship that kick-starts the business or opens the door to a fantastic new investment opportunity.

Yes, it’s a cliché, but only because it’s true: investors don’t invest in products, they invest in people.

Benefits of networking

Networking is primarily a way to increase business opportunities by making new contacts who might present new deals or investments, either directly or indirectly. Beyond that, it’s also about finding and creating your own professional community.

When it comes to startups and business founders, perhaps the most obvious benefit of networking is providing access to potential investors. But there are also less obvious benefits, such as linking up with experts who can provide education or knowledge, meeting influencers, or potentially sourcing future employees. More holistically, it can be a way to build friendships or support groups for a specific industry or at a particular location.

One often overlooked form of networking is mentorship. Older and more experienced professionals are usually more than happy to share their knowledge with those just starting out. Taking advantage of those wise old heads and their years of experience can be hugely rewarding.

For VCs, on the other hand, one of the most time-consuming and critical activities is sourcing deals. Opportunities can be categorized according to how they came to the firm (inbound or outbound) and whether the connection was made by someone known to the firm (warm) or a new contact (cold). Warm deals are usually of much higher quality (or more appropriate to the firm) than cold ones, and warm inbound deals are best of all—also requiring less effort.

For this reason, one of the most important aspects of the VC ethos, long before venture capital investments are made, is building relationships. That network of contacts is literally the wide "net" that catches the best deals.

Effective networking strategies

So, what makes a great networker? There’s no point denying the fact that the world of investment can be nepotistic, and some apparently skilled networkers benefit from knowing the right people to begin with, which gives them a head start. Others are just natural networkers, with a gift for it.

However, more often than not, effective networking is a learned skill, and like any new skill, it requires practice. It’s important not to be afraid of failure; being tenacious and determined is key. Success often comes down to securing the right meeting, at the right time, with the right person. Of course, luck plays a part here, but skilled networkers improve their odds of striking gold by knowing whom to target, when, and where.

The idea of making connections that will have a direct and immediate positive impact on your business can be overwhelming and put undue pressure on networking events. Instead, think in terms of building a community, making friends, and most of all forming relationships that are a benefit to both parties. Remember that people want to meet you: VCs need founders just as much as founders need VCs.

Above all, embrace the idea of playing the long game. Sometimes it can take years before a connection turns into a business opportunity, so continue to build your network whenever you are able, without worrying about when these relationships will bear fruit.

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Where to network

There are many places, both physical and digital, where business founders and investors can find each other. These include investment clubs, online investment crowdfunding sites, and even those dreaded local networking meetings. Networking meetings may feel futile, but you never know when the right person might be there.

Business incubators and accelerators, although not specifically focused on networking, provide excellent opportunities for founders to link up with potential investment. As hubs of innovation, they naturally attract capital. Angel networks are another fantastic resource, not least because high-net-worth individuals are often the best people to provide introductions to other investors.

However, the most effective networkers don’t limit themselves to traditional networking opportunities but make sure that everyone they meet knows who they are and what they do. Every day is an opportunity to network, and every occasion is a potential opportunity to meet the next collaborator or colleague. To paraphrase the character Blake from the movie Glengarry Glen Ross, “Always be networking!”

Maintaining and nurturing real relationships

Investors are much more than simply a source of capital. They can be a fantastic resource for advice and introductions to other contacts. As a result, it’s important to nurture these relationships to maximize their potential.

Fundamentally, once you've established a relationship with an investor, you should keep in regular communication with each of them. That means sharing achievements and milestones, and celebrating successes together. Investors will want to see an upward trajectory representing progress on their investments. However, you should also listen to any concerns they may have and speak to them about your own challenges. You never know when they may be able to help you, or vice versa.

Above all, the key is to make your contacts feel necessary and important to you—and expect the same in return. Remember, effective networking is itself a form of investment. Some of the contacts you make today could be in your life for 20 years or more.

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