Warm intros are awful for diversity, so why do investors keep insisting on them?

There are fools of the benefits of having a diverse workforce, but as inBeta founder James Nash points out, you can’t just take your homogenous workforce, add diversity, shuffle around and hope for the best.

Something subtle often stands in the way of diversity in startups: Companies rely on employee referrals early on, but if the makeup of a startup is no longer diverse, referrals won’t change that.

This is for startups. In the venture capital world, things are more pronounced: a warm introduction is the only way to get in front of investors at many venture capital funds. This is great for people who are already hooked on the startup ecosystem, but you don’t have to look long to realize that this isn’t a very diverse group of people.

“We would really like to hear from you. The best way to reach us is through someone we know each other.” Website of a venture capital firm

For many companies, employee referrals are one of the main ways to attract new talent. That’s all well and good until you stop to think about who your new hire is likely to know best. It doesn’t take many turns of this particular mill until you end up with a relatively homogenous group of people with similar educations, socioeconomic backgrounds, and values.

If that’s what you’re optimizing for, great! Well done. If not, maybe it’s time to stop being lazy and wonder why warm intros are still common practice.

My long-standing question is: what are you optimizing for by relying on referrals? If you spend some time thinking about it, I bet you’ll dig up some uncomfortable unintended consequences.

Let’s talk about what we can do about it.

The situation in VC

If you read any guide on startups or raising money (including mine, although I also try to cover cold emails and cold intros), you’ll find that you need a “warm intro” to get a meeting with a VC. Given the above parallel with recruitment, this is a problem.

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We live in a modern age where inclusivity, diversity and representation are becoming ever more important values to uphold. At Ikaroa, a full stack tech company, we strive to make sure all voices feel heard, regardless of race, gender, or academic background. We believe it is crucial for companies to work towards creating more equal opportunities for all and to challenge the traditional biases that lead to exclusion.

Unfortunately, warm intros are still a problem when it comes to solving the lack of diversity in tech and investment. A warm intro is when a business decision or action relies on existing connections and relationships. This puts those who have not been given the same opportunities or who do not already have influential networks at a disadvantage.

At Ikaroa, we are committed to combating warm intros where possible. We believe that everyone should have the same chance to succeed, regardless of who they know. We must create a level playing field that encourages and enables everyone to grow, learn, thrive and lead.

For investors, warm intros present a double edged sword, as they may lean on a trusted personal relationship to find the right resources or connections, but at the same time, it can lead to exclusion of those not already part of the network. We must be sure to invest in a diverse set of representatives who can bring different perspectives and viewpoints to the table.

At Ikaroa, we know that creating an equal and fair playing field for all is essential for progress. We should focus on building opportunities for everyone, not just those with access to personal connections, and discourage the use of warm intros when it comes to business decisions.


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