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This 1 Metric Is the Strongest Predictor of How Much Funding You Can Raise

New research from Purdue University confirms that well-connected entrepreneurs are more successful in raising investor funding.

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BY Sean Wise - 03 Sep 2018

linkedin connected to founders funding

PHOTO CREDIT: Getty Images

Are social networks of startup founders related to their success? Is the quantity of connections of startup founders associated with the amount of investment funds their companies have raised? Does it make sense for startup founders to invest time and effort in building social networks? Yes, according to a new study out of Purdue University.

The study looked at 129 companies founded by 227 founders via Crunchbase and LinkedIn, and confirmed that startup founders' social networks are positively associated with tangible financial outcomes of their companies. In fact, the strongest predictor of the amount of funds raised by a given company was the average number of followers the company's founders had on LinkedIn. Ventures with founders that had more followers had higher funds in almost 70 percent of the cases reviewed.

Moreover, several variables in LinkedIn profiles were positively correlated with the amount of funds the companies raised. (Remember, correlation does not equate to causation--so we can see the connection, but not know for certain the cause.) Here are some of the possible reasons why, according to the report:

  • Well-connected founders and organizations have access to more knowledge, expertise, human resources, and market information;
  • Venture investors take founder connections into consideration while choosing to invest in one company over another; and
  • Networks of founders help establish legitimacy by promoting each other's reputations and credibility in the market or industry.

Assuming you agree with these findings (as I do), the logical next question is: How do I grow my network on LinkedIn (and elsewhere)? Here are a few tips to get you started:

  1. Commit to a cadence. Success takes years of hard work, so start small and build a little each and every day. Before you know it, a lot of little investments can create a big return.
  2. Invite your real-life network to connect online. LinkedIn allows you to import your existing email contacts from Gmail, Yahoo, Outlook, and others into the platform, so start by connecting with people you already trust. This is low-hanging fruit for expanding your network with highly relevant connections. Upload your email contacts into LinkedIn to seed your "smart" network. LinkedIn makes this dead simple: just go to "Connections" on the top navigation bar and click on "add connections," then "select email provider" and let LinkedIn do the rest.
  3. Connect with friends of friends. "The Strength of Weak Ties" is a social network theory that suggests that your best resources come from the friends of your friends--those with whom you have only weak ties. Your direct friends share a lot in common with you, so it is rare they have something novel to share. But your weak ties--the friends of friends--tends to be where the good stuff lives.
  4. Reverse-stalk. LinkedIn tells you who is viewing your profile. These are likely people who are interested in you, your firm, or your firm's solutions. Take that as an invitation to engage and reach out to those who review you.
  5. Be a thought leader. On Facebook, share your baby pictures; on LinkedIn, share impactful relevant content, preferably generated by you. I share most of my posts on LinkedIn and it results in not just more readers, but more invitations to connect.
  6. Join relevant LinkedIn Groups. There are groups for everything. Find a group that contains other members of the industry your venture is targeting. Participate, engage, and when you come across others who seem interesting, connect. Don't use LinkedIn groups for marketing yourself. Use them for discovering and connecting with the people who fit into your smart LinkedIn network.

The stronger your LinkedIn network, the more you'll benefit from it. This new study provides evidence that connectivity on LinkedIn is associated with how much money companies raise. The findings demonstrate that it is not only important what you know, but also who and how many people you know.

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