Cash from contacts is a BBC article that discusses LinkedIn’s model of letting the have nots have access to the haves.
Cash from contacts
By Maggie Shiels San Francisco
The way the old boy network does business is being given a high-tech makeover. A growing number of Silicon Valley start-ups are emerging to help individuals and companies cash in on who they know. One of those is LinkedIn, an online invitation-only networking service based in Mountain View. Chief executive Reid Hoffman told BBC Online using the internet speeds up a user’s ability to access contacts and to make more connections that he or she would have done in the real world. He says in four months LinkedIn has grown from 100 members to 23,000 and predicts more than a million people will be logging on by June 2004. The service spans 110 industries from computers to catering and sports to medicine in over 75 countries. It also boasts an 80% success rate in users making a positive connection via the network. But Mr Hoffman acknowledges that LinkedIn’s future relies on the old fashioned-way of bringing ‘haves’ and ‘have nots’ together.
“The ‘haves’ are essentially people who have resources, who have jobs, they can hire people, they can invest in companies,” he says. “They have to be linked up to the other people who want to do business with them to create new business. “And so what I realised is what the ‘haves’ care about is trusted introductions, someone coming to them through someone they know. “Now rather than playing a round of golf for four hours, the Internet lets us make those connections more effectively and more quickly.” Tina Mitiguy used the service to land a job after six fruitless months of going to seminars, talking to everyone she knew and registering with online job sites.
It was only when a college friend invited her to join his professional networking group on LinkedIn that things changed. “When I think back on it, it was an exciting day. About a week after posting my resume, I got a call and a call is always better than an email,” she says. “A few days later I went for an interview and landed a job as director of member services at a start-up called REd Medic which was exactly what I was looking for in the technical medical field.”
What LinkedIn claims to do for individuals, Spoke Software of Palo Alto claims to do for business by leveraging employee contacts to help close a deal. While LinkedIn’s service is built from the bottom up with members submitting contacts, Spoke’s software works from the top down pulling contacts from workers’ e-mails, buddy lists and electronic calendars. A connection can only be made if the contact gives permission, but numbers alone are useless in a company with hundreds or thousands of employees. CEO Ben Smith told BBC Online the beauty of the product is that it maps relationships between people. “We are not so much focused on getting from one person to another as discovering who people know and why and leveraging that to provide insight, access and influence for people who are using our software.” One such company is Determine Software of San Francisco.
CEO Scott Martin says: “We’ve had a couple of examples with prospective customers where we had an enquiry come to us. We then backtracked to see if we knew anyone in that company so we’re not just blind responding to this request.
“And in those cases where we made that contact it was very beneficial to us to have that inside coach say ‘yes, this is a real project and I will go in and be a reference for you.'”
Spoke’s Ben Smith says in today’s fast-paced economy using who you know can translate into real dollars and cents.
“We are seeing a 26% improvement in pipeline productivity because when you get right down to it, what business is about is accessing relationships and information through relationships.
“It’s not how great a presentation we give, but how great is the information we have to shape that presentation that often closes a deal or doesn’t.”
The venture capital community is recognising the value of these networking operations and loosening their purse strings.
Spoke has reaped over $9m in venture capital funding.
Reid Hoffman claims about 15 venture firms want to invest in LinkedIn, proving his business model fits a world where no-one has a job for life anymore.
“The mobility of people changing companies and industries over their career is an overall trend.
“As long as that’s the case this kind of service is essential because the way you cross that is when someone will take a risk on you and the reason they will take a risk on you is because they have an endorsement from someone they trust.”