(Extracted from: Network! Network! Network! How Global Technology Start-Ups Access Modern Business Ecosystems Antti-Jussi Tahvanainen, Research Institute of the Finnish Economy / Stanford University, Center for Design Research)
Networking in Silicon Valley flourishes based upon three overlapping concepts: Serendipity, Flexibility, and Reciprocity:
Among the many principles that are discussed and employed none is as recurrent and dominant as serendipity. Easily misunderstood as an antonym for a strategic approach, serendipitous networking can best be described through a metaphor; a visit to the museum, as which one of the participants described it:
A guest enters the museum. She might have an idea of what to broadly expect, but she does not truly know what exactly it is that she will discover and how valuable the experience is going to be for her. She enters despite, ready to be surprised and expecting to stumble upon something or someone that will be of value to her. Many times she will find interesting pieces right there during her visit. Other times she won’t necessarily understand the value of all her experiences right away. Their true value might dawn on her much later when, in another context, she suddenly connects elements of the present situation with a certain experience earlier in the museum. That is when she is able to fully understand the value of the experience, get back to it and exploit it to its fullest extent.
What the metaphor conveys so clearly is that often it is impossible to explicitly plan on the most beneficial contacts and to plan on who will be important to the business. Implicit in this finding is the start-ups’ frequent disappointments with strategically identified and pursued prospects. The reasons are fairly natural, often involving a mismatch between expectations and reality. Publicly available information, even recommendations by trusted third parties or initial correspondence with candidates often fail to convey the true compatibility of the offerings of two prospective partners. Instead, many of the firms’ most beneficial contacts have been established unexpectedly in contexts that were not planned on.
As haphazard as this approach may seem, serendipitous networking is very purposeful and strategic. It involves a lot of explicitly dedicated time and strenuous work. Some of the start-ups consciously take time off from business development and other structured work whenever an opportunity presents itself to visit industry events, start-up camps, seminars, and other venues with an interesting audience. Others have a more structured approach and spend one dedicated day a week on mingling in the community; be it at universities, in social media, or the aforementioned venues. Being strategically serendipitous implies that networking just for networking’s sake must be perceived as a fundamental and explicit part of work; it has to be resourced properly, something that does not come naturally to firms coming from a planning-based business culture, as most of the start-ups with a European background explained. In such cultures, a manager who is visiting events or conversing with seemingly random people in nearby cafés without clear, agreed upon context while others sit at their desks in the office can at worst be frowned upon. Thus, serendipitous networking must be based on a shared, agreed upon culture that the organization as a whole buys into.
Because there is no telling ex ante who exactly will be of value to the firm, flexibility dictates that virtually everyone in any context of encounter is given a window of opportunity, be it in a line waiting for your turn at the lunch buffet, at an industry networking event, meeting over coffee with a new prospect from the last trade fair, or an agreed upon appointment with a VC. In this window ideas are exchanged. The start-ups felt that in the flexible mode it is very important to understand the difference between mutually exchanging ideas and pitching a fixed proposition. In the best case, an idea is like a Christmas tree, as one of the entrepreneurs put it; a tree that people along the way – through encounters and discussions – can “hang things onto and change their arrangement.” As the idea gradually unfolds the tree grows to its final form as a joint contribution.
A valuable encounter is characterized by mutual excitement. It is a tell-tale sign of the necessary motivation and drive to be translated into action. In such an encounter, the entrepreneur’s original idea is first validated by her respective counterpart. During the ensuing conversation, the counterpart often revises, builds, and expands on the idea, which in turn is validated by the entrepreneur. The entrepreneur walks out of the conversation with something more meaningful than she walked in with. The original idea has grown and become a concept that neither of the parties could have created independently. It is the foundation for a shared network connection that is built on co-creation.
Not nearly all encounters lead to concrete collaboration, but in the course of several encounters, networking becomes an adaptive, long-term process through which the original value proposition of a start-up will reshape and adapt to its respective ecosystem.
Serendipity lives off a culture of reciprocity. It is the shared ecosystem-wide understanding that, for an individual to extract benefit from a random encounter, everyone in the community needs to be willing and ready to provide it. In return, those expecting advice, help and feedback need to first think of how they can bring value to the system before asking for it; a purely opportunistic approach is very short- lived and is practiced at the risk of being unequivocally stigmatized. Because of the prevailing culture of reciprocity in Silicon Valley, start-ups find it relatively easy to approach new contacts and retrieve feedback and advice as long as they are able to convey a promise of mutual interest. The interest does not necessarily have to result in immediate benefit. As discussed earlier, the benefit accrues over time through a process of co-creation together with a multitude of different individuals and stakeholders. Instead, providing someone a favor is considered an investment that might create returns at some unforeseeable time in future. It creates social capital that can be called upon when needed, possibly in a very different context.
This rather ambiguous and seemingly altruistic concept of reciprocity is pursued strategically by stakeholders in Silicon Valley. One of the entrepreneurs, for instance, dedicates a frequent quota of five percent of his time to provide his existing network with benefit that he does not expect to gain from directly. Good examples are helping people to secure employment and providing new-comers with trusted referrals to stakeholders that might be of value to them.
Methods for Networking in Silicon Valley
Leveraging digital media
The rapid technological advance in digital media and its wide adoption in business practice has had a major impact on the way start-ups explore targeted ecosystems for prospective partners. The diffusion and acceptance of social media in the professional sphere has been a total revolution in contacting and reaching out to partners.
Social and other digital media facilitate both serendipitous and planned approaches to networking. In serendipitous mode, start-ups use social media to tap into a vast, unknown mass of potential partners, aiming to attract those who truly are interested in the firm’s value proposal. An excellent example is a video that a start-up posted on YouTube about its product prototype. In a short time the video “went viral” and attracted a large number of direct contacts from a variety of partners interested in collaborating or using the technology. The video created a pull effect that encouraged the founder to incorporate the idea and develop the prototype to a commercial product with the help of the newly gained contacts. Today, the company’s product is used in more than 50 countries. Crowdfunding sites such as Kickstarter and IndieGogo can have the same impact today.
Digital media can be employed in this way to validate concepts by a large audience. The validation not only implicitly establishes connections to relevant partners, but also lowers both technological and business risks and attracts feedback and new development ideas from a diverse base of stakeholders. It can also be leveraged as a tangible reference to convince funders and other partners of the concept’s acceptance among stakeholders such as potential clients.
Other platforms used in the serendipitous networking mode are business and technology blogs, as well as social micro-blogs like Twitter. Used for a slightly different purpose, they are leveraged to spread new ideas and concepts in real-time, to project competence, and ultimately to establish the firm as a thought-leader in its ecosystem. In this sense firms use the platforms to gain credibility and status, and to build a positive reputation as a stakeholder to be taken seriously. The power of blogs and micro-blogs is in their ability to open up public conversations in relevant forums and build virtual communities of followers around them. These discussions are used to provoke feedback and gather ideas for product and business development. As importantly, the contacts attracted through this type of interaction have a higher probability of being relevant to the firm since prospects that do not see a value in the firm’s product or service will not make contact in the first place.
Digital media, and especially social media, have also greatly changed approaches to networking in the planned mode. Professional social network platforms such as LinkedIn have had a particular impact. Their powerful search functionalities have made it possible to scan a vast global mass of detailed individual profiles in a highly targeted and specified manner at virtually no cost. Once prospective partners have been identified, their profile information greatly helps in making an initial due diligence regarding their backgrounds, interests, networks, current endeavors and other aspects that are worth knowing when making contact. What previously took weeks of time and effort, and necessitated strenuous footwork and/or the use of external consultants is now a few mouse-clicks away. Identifying a potentially valuable partner is faster and considerably less expensive than before the dawn of on-line social networks.
Social networks have become an accepted channel of making the actual contact as well. Especially for European entrepreneurs, LinkedIn has changed the very conventional, formal, indirect and sluggish culture of making the first contact with high-ranking decision-makers. Previously it has been strict etiquette to work through an organizational hierarchy of gatekeepers before gaining the eventual opportunity to speak with an executive with decision-making power. The redefined etiquette of social networks allows entrepreneurs to bypass the hierarchy and to approach executives directly. That being said, without referrals it is still very challenging to extend the relationship beyond the initial contact. But even in this regard social network platforms are helpful because most of them openly display individuals who are common to both parties’ networks. These individuals are easy to approach with a request for a referral that is trust-based.
Some social network platforms also provide functions that disclose information on individuals who have visited a firm’s on-line profile. It has become a frequently used way of creating a natural context for contacting; an interest-based virtual event to follow up on. “You visited me on LinkedIn. How can I help you?” is an effective hook to start a conversation.
Leveraging Networking Events
While digital platforms have changed many conventional practices and created entirely new ones, they haven’t replaced event-based forums as a long-standing practice to network. Start-ups that manufacture physical products are dependent on events such as trade shows where prospective customers are able to interact with and experience the product hands-on. These trade shows attract stakeholders from all tiers of the ecosystem and are an opportunity to gain visibility. They are an arena set for serendipitous encounters but are not necessarily very efficient.
Start-up events, on the other hand, are of particular interest to fresh entrepreneurs. Attended by many important stakeholders from the respective ecosystems, ranging from fellow entrepreneurs to financiers, and from legal service providers to media representatives and industry, most start-up events are structured as business idea competitions. Usually the events feature a networking phase during which attendees are to form teams to develop a business idea. The idea is then pitched to a jury or the audience to determine winners. They are an effective forum for entrepreneurs to mingle with peers and other like-minded individuals because everyone present is looking for collaborative opportunities.
While networking at start-up events is inherently serendipitous, the events’ context specificity and the attendees’ purposeful openness to new ideas raise the probability of relevance in individual encounters. Thus, many entrepreneurs exploit the events for recruiting, obtaining feedback on business ideas, and pitching to investors, and asking for referrals to previously identified important contacts. The start-ups emphasized that to retain any value from such events it is paramount to take a proactive stance to approaching attendees. Popular individuals known to be key stakeholders and gatekeepers in the local ecosystem are embattled for their time at events. The window of opportunity is small and needs to be exploited. For European start-ups not used to a purely transactional social culture, they may find it relatively difficult to approach individuals without an existing social context.
Recruitment as a networking strategy
Recruitment can be strategically leveraged to expand a start-up’s reach into an ecosystem. The key is to hire employees with large existing networks. These are usually business function specific depending on the individual’s professional background, but they are also all the more robust, reliable and efficient due to established and proven routines and codes of conduct. The start- ups have found this to be a very effective practice to identify and engage prospective high-quality partners because it is considerably faster than a conventional search and it guarantees a match with expectations with a higher probability. Problems with personal chemistries have also been found to be less frequent, and the level of commitment once a relationship has been established is higher than with entirely unaffiliated partners.
Sometimes recruiting can be the only mechanism to gain access to certain industries. Trying to approach a traditional, incumbent industry with new technological solutions is a challenging task. Furthermore, to be taken seriously as a young, inexperienced start-up is difficult due to a lack of reputation and credibility in the target industry. A good example is the attempt to bring the concept of internet-based crowd-sourcing into the document processing industry. One of the start-ups resolved the problem by hiring a veteran salesman from the incumbent industry who “knew the tricks of the trade and had access to a fat Rolodex”.
The start-ups noted that for a foreign company trying to access local ecosystems hiring can be a major challenge. Due to the lack of credibility the best expertise will most of the time not be available. Similarly, the local salary-skill ratio can take the unwary foreign entrepreneur by surprise.
Developments in information and communication technology have also had a changing impact on how start-ups contact identify partner prospects. Emails replaced cold-calling in the 1990s, and now social media with their built-in functionalities to integrate trusted referrals and messages are strongly gaining in popularity as the preferred channel to reach out to new partners. With the rise and spreading acceptance of social media as a new, more direct and information-rich gateway to untapped networks, it is the firm’s task to learn how to use them effectively. A firm needs to be aware of how and in what context their contacts use digital media.
For instance, digital content is increasingly viewed and created on the go on mobile devices. Emerging rules of engagement dictate that a message should not take more space than fits onto a smartphone screen. Another frequently mentioned new practice is to exploit the convergence of social media, mobile technologies, and digital video, the latter of which is increasingly replacing text as the conveyor of information. Video as the focal content of a message bears many advantages over conventional text. It is superior in explaining complex concepts in less time and a more tangible form, it leaves less room for misinterpretation and errors, it can provide holistic, detailed and situation-specific descriptions through observable examples (prototypes, users in action, animated charts and process diagrams, service scenarios, etc.), and, most importantly, it requires less effort for the receiver of the message. A typical email or message on social media today usually consists of a fairly information-rich subject line, and a message body comprising of a single line of text and/or a video link.
Pitching the idea – For new entrants into a foreign ecosystem such as Silicon Valley the actual event of pitching an idea to a prospective partner should not be approached as a one-time sales meeting. Pushing a fixed solution mostly ends in dismissal. Instead, start-ups advocate approaching pitching as an extended learning process, in which the partner is courted patiently over a longer period of time. It is important to be flexible enough to allow space for co-development of ideas and adaptation that ultimately can lead to a mutually beneficial match in supply and demand. The long-term goal in this approach is not necessarily to affect an opportunistic transaction but to build a lasting, empathetic relationship with the partner. The partnership does not even necessarily have to produce benefit directly but to serve as a strategic platform that can spawn unforeseen opportunities through their contacts and ideas.
A well-received practice to signal flexibility and readiness for a symbiotic, co-creative approach to a partnership is to build the pitch in story format. Instead of listing technical specifications, pie charts and numbers to the audience, the pitch takes the form of a well-scripted, flowing story. Stories can holistically depict how the company grows through its life-cycle or they can tell of a single encounter between a user and the company’s product or service. Much like tangible prototypes, stories have the power to establish context and show relationships between seemingly unrelated ideas. They are able to present fuzzy and otherwise ambiguous elements of a vision as a coherent flow of arguments, connecting ideas with intended actions and pursued outcomes. Stories have also been found to boost factual recall and comprehension. More importantly, stories invite the audience to add to and develop them. They inspire, excite, and spark new ideas, and provide a better foundation for constructive feedback as their flaws and potential for improvement can be shown in the story’s context and outcome.
Story-telling as a pitching technique cannot omit the required factual elements, however. In a formal meeting, a pitch deck of 10 to 15 slides with 3 to 4 slides on the core of the proposition are still the expected norm. All the relevant arguments and numbers have to be included in the story. The pitch also has to address the proposal’s unique added value to the courted partner’s business, which requires a well-executed due diligence process. There are also the usual time constraints. Story-telling is just a more engaging and inspiring format for conveying information. Once the script is laid out, it is fairly easy to add the numbers and indices typical of a conventional pitch without drowning the audience in statistics.
Prototyping is another powerful tool that facilitates pitching and provokes relevant feedback. Similar to the use of videos, prototypes also convey vast amounts of complex information in a short time, and provide the opportunity to interact with and test a proposed concept. The pitch becomes an engaging, in-depth learning experience for the prospective partner as hands-on experimentation with the prototype generates both new and relevant questions as well as unexpected ideas on how the concept could find use in the partner’s business. In this sense, a prototype helps to establish proof of concept and to gain credibility. In addition, feedback gathered from a prototype is often more helpful than feedback on conventional pitches, because it is more prolific, detailed and constructive, and helps identify concrete action points to develop the concept further.
Note that it is not always clear who is the actual decision maker in a large prospective partner organization. Also, there is the central role that external consultants can play in decision-making. It goes without saying that knowing who the decision maker is affects the approach and content of a pitch. It also has an impact on how feedback from different individuals in the prospective partner’s organization should be treated. Analogously, it is ill-considered to enter a meeting in Silicon Valley without some ad hoc decision-making power. Especially companies accustomed to the European business culture characterized by consensus-seeking, board-based decision-making processes have to adapt to a paradigm that calls for more individual autonomy in decision-making. The lack of such autonomy can easily be misinterpreted as lack of confidence, commitment, and determination. In the worst case it will be taken as an offense due to disrespect of the prospective partner’s time. In either case, decision-making power is considered a fundamental element of credibility.
Lastly, an entrepreneur must be ready to pitch her concept at anytime anywhere as some of the earlier examples on serendipity illustrated. In Silicon Valley in particular this includes contexts that transcend the strict business sphere. It is normal to discuss business-related ideas and ambitions over a casual Sunday barbeque with friends as people naturally mix work, life and play as a way of life. In this context the skill of casual small talk is irreplaceable. Available mobile technologies can assist in such ad hoc pitching as they have enabled access to virtually any form of media from virtually any location. Presentations, videos, and software prototypes can easily be shown on a pocket-sized device with enough storage capacity or a mobile data connection.
Networks are first and foremost personal; they are built by and bound to individuals through long-term, hands-on work with local stakeholders. “It is really about creating relationships beyond the networks; those are the connections where you can trust that the person will actually listen to you and be open.” Establishing an extensive network and securing a reputable position in it is a strategic and slow process. To add to the challenge, for a node to work effectively and to be able to provide services to a wide variety of different client companies, the node’s networks need to be vast and complex.