When I was a kid, my parents told me “you should never talk to strangers.” While this was a common refrain among parents worried about the safety of their kids, it is a very bad life philosophy to learn, particularly if you want to become an entrepreneur or investor in start-ups.
Networking and being able to talk to people you don’t know is one of the most valuable skills you can have in the world of entrepreneurship. Social psychologists and sociologists have demonstrated repeatedly the power of networking and social interaction in a variety of settings from selling products to raising money to managing employees.
Talking to strangers can have effects like the proverbial weather changes that come from a butterfly flapping its wings. A conversation with a stranger can lead to an introduction to a customer, supplier or investor that can change the direction of a company.
To illustrate this point, let me tell you a story that happened to an investor I know a few years back. He was sitting on a United Airlines flight waiting for the pilot to push back from the gate. Due to a heavy cross wind on the runway, the pilot announced that they would not be pushing back and there would have a short delay. My friend mentioned to the guy seated to his left that other planes were taking off. The other guy responded that he thought the pilot was being ultra conservative, perhaps because he had gotten into trouble with management for taking off in these kinds of marginal situation before and was now planning completely by the book.
For the next hour and a half, the investor friend of mine and this other guy received updates about the other planes taking off. Each update led to a string of interactions between the investor and his seat mate, that got longer and longer, and eventually led to an ongoing conversation.
It turns out that the investor’s seatmate was an immigrant entrepreneur from Israel. As an investor in early stage companies, my friend is always on the lookout for new companies, and Israel is a great place to scout for the kind of companies he invests in.
It turns out that this entrepreneur started biomedical ventures, which my friend tends to avoid. But the entrepreneur knew a lot of founders back in Israel who had started the kind of software businesses that my friend backs.
The conversation on the plane led to a meeting at the investor’s office the following week. That, in turn, led to an introduction of the investor to several early stage Israeli businesses. My friend ended up investing in one of the companies. Two years after he invested, the company was acquired at a valuation 42 times what my investor friend paid for it.
Had my friend not talked to his seat mate about the poor decision making of a United Airlines pilot, he never would have put in place a chain of events that led to his second most successful start-up investment. If you are a start-up investor and you talk to strangers, you generate new paths in your network that can lead to very successful business outcomes.
This story has a moral. Kids, don’t listen to your parents. You should always talk to strangers. Sure there is risk in doing so (though the risk of talking to a stranger in a public place is probably pretty low.) But the option value of the conversation is likely to exceed the risk you will have incurred. At least it has for a friend.
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