How do entrepreneurs identify and manage the personal connections that are central to their new ventures? Perhaps more importantly, what network-building strategies are most effective? For the last several years, I’ve spent time researching these issues – interviewing more than fifty early stage entrepreneurs and tracking in detail their networking activity as it happens, over an extended period of time. Some of the results might surprise you.
1) It’s not who you know. It’s also who they know. So many people say that success is an “it’s who you know” game. But what does that mean? Conventional wisdom suggests that the “who” of wise networking are brokers – those who can introduce the entrepreneur to a lot of new people. Thus, when asked to name the most valuable members of their networks, many entrepreneurs identified those who were most active in making introductions. The problem is that entrepreneurs selected those providing referrals, even when those referrals weren’t useful! Entrepreneurs in this study saw potential in individuals who led them to new network contacts, whether or not those contacts facilitated the acquisition of needed new venture resources. In reality, not all brokers are valuable. Greater organizational progress accompanied entrepreneurs who valued their network contacts for something other than mere introductions.
2) Know what you’re looking for before you look. Asking for help is essential to entrepreneurial success. That said, not all help is created equal. Consider Entrepreneur A, who asks multiple contacts: “Do you have any ideas about how I can grow my business?” In contrast, Entrepreneur B asks a friend and sales manager, “Do you know how I can identify potential representatives with a proven track record in West Coast OEM sales?” In this study, those who moved fastest and furthest were those who behaved like Entrepreneur B. It seems like common sense. But there was a clear tendency among those in the study to err on the side of generality. Entrepreneurs were more likely to find meaningful help when they named exactly what resource or what type of resource they needed. Specificity not only increased their likelihood of finding needed resources, but also enhanced their ability to create ongoing, exchange relationships.
3) Schmooze with care. When asked about networking’s role in business building, almost every study participant said it was critical. At the same time, many struggled to identify a start point for their networking efforts – especially when they didn’t start off knowing many people. The networking tactic of least resistance often was attendance at a networking event. While it is true that these events might facilitate valuable relationships, study results suggested that, at best, valuable relationships only emerged after the investment of considerable time and energy (and over a longer period than several months). Fewer than 1% of all contacts were met at networking events and subsequently assessed as providing meaningful value. Entrepreneurs were more successful when they deployed a variety of networking tactics – and particularly when they emphasized the use of existing contacts.
4) Consistency is king (even though cash is important too). A successful entrepreneur is a busy entrepreneur. That means juggling a multitude of tasks, all of which might be mission critical. With a finite amount of time to complete a To Do list that seems never-ending, it is very easy to deprioritize network activity in favor of more pressing concerns – things like paying the bills or developing a product. Consider, for example, the tendency to hunker down and turn inward after getting an infusion of investment monies; entrepreneurs who opted for this approach struggled to make progress once the funds began to run low. In fact, the evidence suggested that greater new venture progress accompanied those entrepreneurs who added consistently to their network base. Those who chose to pursue new contacts sporadically, only as resource needs ramped up, struggled with moving forward.
5) Prioritize tangibility. Everyone knows that actual investment is better than a conversation about getting investment. Everyone knows that an actual employee is better than a conversation about hiring. While it can be next to impossible to secure investment or hire a talented employee without first talking about the acquisition of those resources, it is important to move beyond the conversation stage. The evidence suggested that many participating entrepreneurs either underestimated or were fearful of the challenges associated with finding tangible resources essential for venture launch (e.g., money, supplies). They thus prioritized easy-to-access strategic guidance, to the potential detriment of organizational progress. Consider it a corollary to the “know what you’re looking for” rule. While there’s nothing wrong with asking for new venture advice, entrepreneurs were better off when they kept their eyes on the tangible prize – the “something real” that took the advice to the next level. New venture survival and tangibility go hand-in-hand.
6) Build relationships, not acquaintanceships. The mantra of network enthusiasts is “build relationships.” In defining what constitutes a relationship, however, things get tricky. The reality is that many people, despite repeatedly stating their belief in creating long-lasting bonds, in fact spend little time cultivating those in their networks. The findings of the study were clear in their support of follow-up and real exchange: Those entrepreneurs who were strategic in reaching out to others – and who then made sure to keep in regular touch with those others over time – made quicker and more substantial new venture progress than those who simply added names to their Rolodexes.
Elissa Grossman, Ph.D., is an assistant professor at Baruch College, CUNY, having previously been a faculty member at the University of Southern California. Prior to entering academia, she worked in brand management and marketing for companies that included Procter & Gamble, Sun Microsystems, and a Silicon Valley startup subsequently acquired by Dun & Bradstreet. In addition to exploring how entrepreneurs build and extract value from their social networks, she researches investor decision-making, organizational emergence, high growth ventures, technology and innovation. Elissa can be reached at firstname.lastname@example.org. She collects data via her research website: www.networkmapper.com.