Why you should network when raising funds for your tech venture

The value of attending networking events is often hard to quantify, as it takes valuable time, but it is worth the effort especially if you are considering starting your own business; building an innovative product or trying to raise funding.

Funders invest in companies and founders they know

Although we receive many proposals through our website at the VC firm I’m part of, all of the deals that we have concluded (i.e. invested in) to date, have been sourced through our networks. An essential part of our business is the relationships that we’ve been building and nurturing with various suppliers and stakeholders in our industry over many years. We are not unique in this regard.

The 2010 SAVCA Venture Solutions VC Survey, found that 96% of deals that resulted in eventual transactions were sourced through own networks and referrals. This was common to all early stage investors including venture capitalists and Angels.

Many funders attend networking events and while in this informal environment, are open to discussing your business and whether it may be something they would be interested in. If a funder knows that you have a clear idea of what they’re looking for and they know that they’ll be able to work with you, the chances of your business receiving funding increases. Get to know investors and who and what they are willing to back. By knowing what funders look for, you save time and resources, as you can target the most suitable funder, at the right stage and can prepare the information they require upfront.

Leave your comfort zone and create diversity in your networks

It is human nature to network and interact with people who are similar to ourselves. The problem is that by networking with people who share the same opinions and experiences as you, you never force yourself to branch out of your comfort zone. Starting a conversation with someone you have little common ground with is difficult, but these people could be “linchpins” in your personal network. Author Wayne Barker describes linchpins as “gateways, who create shortcuts across clumps”. They have the ability to connect diverse clusters or groups of people, opening your network up to a whole range of new people.

Through diversity and a few linchpins, you could discover a whole range of possible employees or customers, strategic partners, or an investor for your business.

Tap into the power of your weak ties

Our acquaintances, people we rarely see or speak to, are often the greatest source of new ideas and information. This is because we don’t automatically assume they have access to the same information as ourselves, which we do when interacting with close friends and colleagues. The strength of these “weak ties”, as first observed by sociologist Mark Granovetter, is that these people can open your mind to new possibilities which you may never have considered.

If you don’t have the time to network face-to-face with people, make time to network online through Twitter, Facebook and LinkedIn which allows you to interact with acquaintances, gather new information and insight on your business, find new partners, opportunities and share learnings from people who you may never have met.

Invenfin, part of Remgro Ltd, is a seed and early stage venture capital fund. Alexandra Fraser is the Business Development Manager at Invenfin