It took 18 months, but the engineers at JRG Software had finally done it: created an application that would transform the way large companies manage their manufacturing processes. Just one problem remained: selling the new product to corporate buyers reluctant to take a risk on an unknown start-up. JRG's team began working their networks, cold-calling, and direct-mailing, but it wasn't easy. "You've got cynical buyers being barraged with calls, spam, etc.," says Ron Drabkin, vice president of business development for the San Mateo, Calif., company. "They might pick up the phone if you're from IBM. But if you're not, forget about it. How do you get in the door?"
That question has vexed small companies for generations. Much as we hate to admit it, what you know often takes a backseat to whom you know. It's no accident that successful entrepreneurs often are those who know the right people in the right places at the right time. But now wallflowers can take heart. An array of new "social networking" technologies has just made it a lot easier to get to know a lot more people.
You've probably heard of Friendster, the hot Sunnyvale, Calif., start-up that already has 2 million users and is growing 20% a week. It's based on the simple principle of "six degrees of separation"--the idea that no one is more than six people away from anyone else. Sign up for the service, and you can start meeting your friends' friends, then their friends, and so on. It adds up fast: One intrepid Friendster boasts more than 500,000 "friends" on her list.
Home to a hungry mob of Internet daters, Friendster is not much use for entrepreneurs. But a number of new business sites that operate on the same principles are. Ryze, Tribe.net, and LinkedIn are designed specifically to create and nurture business connections. Spoke Software and Visible Path, meanwhile, aim to connect entire corporations into ever-widening Friendster-like webs.
Such sites are still in the earliest stages--many are only recently out of beta testing--but they could fundamentally change the way businesspeople network. Allen Morgan, a general partner at the Silicon Valley VC firm Mayfield, has used LinkedIn to perform due diligence and find job candidates for the fund's portfolio companies (and recently invested in a social networking venture). "It allows you to do activities that you do in the real world but do them more efficiently and powerfully," he says.
JRG's Drabkin would probably agree. About a year ago his company became one of the first to sign up with Spoke, based in Palo Alto, Calif. Eager to set up a meeting with a national food company that seemed like a perfect customer, JRG found the names of the food company's executives in Hoover's and plugged them into Spoke. It turned out that JRG's bookkeeper's sister's boss worked with someone at the food company.
It wasn't much, but it turned a cold call into a lukewarm call, and JRG got its foot in the door. The first meeting went well enough that follow-ups were scheduled, though it isn't clear yet whether a sale will be made. But it was enough to persuade Drabkin to make the software a key part of JRG's overall marketing efforts. Connections found through Spoke, he says, make cold-calling and direct marketing much more efficient. "It's really cool stuff," Drabkin says. "The conventional wisdom is that a very small number of cold calls work out. Spoke definitely improves that."
Different social networking applications work in different ways. But on most sites, individuals create profiles that include their names, professional information, and interests, as well as opportunities they're seeking; and users are encouraged to invite friends to join. Spoke and New York City-based Visible Path take the model further, allowing corporate users to download networking software onto their company's computer system. The software searches the system, pulling data from contact management databases, e-mail accounts, calendars, directories, and elsewhere. Such data is then compared with that of your "friends"--other participating companies--and organized into a map of connections, which can be searched by name, company, or job function. Say you want to pitch your company's product to a purchaser at Microsoft. The software can tell you if anyone in your network has contacts there.
Obviously, such software raises privacy concerns. After all, you don't want just anyone rooting through your phone book and pestering your professional contacts. Programs like Spoke address that problem in advance by not revealing names. Instead, the software e-mails potential contacts and lets them get back to you.
It's not a slam dunk--the contact might not care that your brother's partner's wife just happens to be a member of his homeowners' association. But it sure beats cold-calling.
Business-oriented social networking software has a ways to go before reaching Friendster proportions. Spoke claims 5 million names in its public network but has far fewer actual users; Ryze has about 50,000 users. Few of the sites charge for services, though that's changing: Spoke and Visible Path now charge for pilot tests of the software. It's not cheap. Getting your company on Spoke runs as much as $75,000. Visible Path will charge $25,000 to $40,000 for companies with about 100 users.
Social networking software doesn't replace real-world relationship building. But it does provide one effective way to harness your networks--even to folks like Keith Furuya, a financial adviser at Silicon Valley Financial Associates, an investment firm in Campbell, Calif. He has 3,000 names in his personal contact manager and more than 11,000 connections on Spoke. He says the software has helped him win a number of new clients and some significant sales. "I still do lots of the same stuff--talking to people, going to association meetings," says Furuya. "This allows me to do it more efficiently. I don't even know how to quantify its value, but if they asked me to pay $50 a month, I'd pay it."