The Value of Friend-Raising

9 Comments

During my last trip to the Bay Area, I visited with FoundRead’s “Carleen Hawn”:http://www.foundread.com/person/3291-carleen. When Carleen asked me what I was up to, I explained that I was buried in back-to-back meetings with folks around town discussing my current project, “Go BIG Network”:http://www.gobignetwork.com/. *“Are you fund-raising?” she asked, to which I responded: “No, I’m friend-raising!”* I wasn’t kidding. I was on a mission to make as many new friends as possible.

You see, our company’s growth isn’t _only_ dependent on finding more cash; but it _is dependent_ on us meeting more people. And frankly, I’ve always found *”raising friends” is far more valuable than raising money.*

*The Monetary Value of a Friend*
For the sake of this argument, let’s set aside the fact that _true_ friendships aren’t really about money. But in a business context we’re probably not talking about true friendships at all. We’re talking about building relationships with people who can help grow your business; put another way, people whom you would otherwise have to pay money to meet.

For example, you could take some of your VC funding and hire a business development executive to go out and build new partnerships on behalf of your company, and to extend to your operations with his or her existing rolodex of “friends.” But, you’d be “purchasing” those relationships and deals — to the tune of about $100,000 in annual salary for the biz dev executive.

Now imagine that this same biz dev exec is a friend of _yours_. Instead of shelling out six figures in cash, he or she simply would *make the same introductions for you as a favor.* In this case, the value received is exactly the same, but the cost to you is zero.

So while many entrepreneurs spend most of their time ingratiating themselves with VCs in order to collaterally gain access to useful people, I figure out who those useful people are first, and then spend all my time trying to meet them myself.

This is what I mean when I say *I swap fund-raising for friend-raising.*

Wait a Minute! *Isn’t that just “Networking?”*
Okay, sure it is. It’s networking. It’s business development. Sometimes it means pretending that the people I meet at a cocktail party aren’t _as important_ to my business as they are, and so forth. It’s all of those things, but more importantly, it’s recognizing that money typically buys relationships in an indirect way. It’s also recognizing that *the more relationships I build, the less money I need.*

*My Friendship-Development Plan*
You’ve heard of a “Business Development Plan”. It’s a series of targets and milestones that execs use to grow their sales efforts. I’ve worked on BD Plans for ten different companies, and in every case, it was ultimately about creating relationships.

When I realized this, I shifted my focus to the Friendship Development Plan. I laid out all of the relationships that I would need to have — everyone from *investors* and *advisors* to *bloggers* and *customers.* Then I created milestones or targets, focused on a few people whom I would try to build a relationship with along a specific timeline.

I divided the list of friend prospects into strategic categories. For example, I knew Go BIG would need a voice in the blogging community, so I set out to build relationships with the folks at “GigaOM”:http://gigaom.com/ (parent of Found|Read), “VentureBeat”:http://www.venturebeat.com/, and “TechCrunch”:http://www.techcrunch.com/. I’ve now written for all four of these sites!

By simply picking up the phone and forging relationships with “Om”:http://www.foundread.com/person/3008-gigaom, “Matt”:http://www.venturebeat.com/about and “Mike”:http://www.techcrunch.com/about-michael-arrington/ directly, I avoided needing to pay some PR agency a $10,000-a-month retainer for the same benefit.

*Getting Serious About Friend-Raising*
Most founders know that they need to network more, but they still don’t do it. Yet inexplicably, entrepreneurs happily devote countless hours to courting the gods of venture capital.

If you could take all the time and energy you’ve spent courting capital and express it in terms of “useful resources purchased,” I think you’d find that getting serious about “friend-raising” is the more economical proposition.

Your plan to build friends won’t ever be as quantitative as a tradtional sales plan–in which it is possible to tie new customer relationships directly to receivables. Don’t be so callous as to try to equate every new friend to a dollar figure (which is just weird). Quantify it this way: as the total value of time and energy you _save_ in terms of the fund-raising you no longer need to do_.

In Go BIG’s case, by taking all the time and energy that might have gone into fund-raising and refocusing it on building relationships ourselves with the media, customers, partners, and talent, we avoided taking a first round of capital. I can’t say how much any one of these friend-relationships is worth in simple dollars, but I do know that we skipped raising what otherwise would have been a $2 million A-Round. And Go BIG did just fine.

Of course, now that I’ve said all this, I’m probably get a bill from Carleen. But it still will have been worth it.

9 Comments

theunknownfounder

Are all your LinkedIn contacts “Qualified Investors”? (http://invest-faq.com/articles/regul-accr-investor.html) If they are not you may run into trouble down the road. When a company I was involved with took an investing round we had to pay off all the previous investors who were not qualified so that our books were clean for a possible IPO or purchase by a public company… expensive use of funds and not easy to explain to investors that are being bought out because they are not rich enough to participate (anymore).}

solofo

Absolutely correct.

Me too, founder of a new startup (Beezbox), I gonna do a “Friend raising” by proposing to all my LinkedIn contacts a great deal to getting into our project at a price that will be probably 1/10 the price proposed to VCs on the 2nd round.

We got already 2 friends as investors (ticket is around USD 30K) and we’re looking about 10 of them
For more info, check my blog: http://emergingworld.blogspot.com}

wschroter

@ Mike – I don’t think you can be too secretive about a startup. I’m sure in some cases it can help, but generally speaking, if someone else can steal your idea just by hearing about it, you don’t have that strong of an idea.}

mikesimonsen

Well put Wil. I’ve never been a super-diligent networker, but our strategy with this company is to be as wide open as possible with as many people as possible.

We’re open about our business model, our technology, strategy, and tactics. We share a lot and get more in return.

What we’ve found is that people really want to help you succeed. By sharing all the goodies, we end up developing real friends. Some of them turn into deep strategic assets for the company.

I watch so many tech entrepreneurs hide their plans. They don’t trust anyone, fearing their ideas stolen. Then they ask, “why won’t anyone help me?” These guys are most certainly not friend-raising…}

wschroter

unknownfounder – love that pic.

I was trying to point out that there is definitely a difference between making friends and networking or “friend raising”. The term “friend” here is probably mis-used.

I wanted to write some more about the good karma aspect, in that you need to give more than you plan to recieve. I agree with that completely, but in 800 words or less I wanted to focus on the financial benefit which somehow seems to strike a more relevant chord for entrepreneurs!}

theunknownfounder

I have found it amazing how many of the successful people I know have a seemingly natural ability to not only network, but do so with a large number of people. Along with natural social skills, that allow them to participate in engaging conversations with almost complete strangers, data like names, phone numbers, email addresses seem to naturally settle into their memories to be easily accessed years later. Those of us with out this genetic talent must build a “Friendship-Development Plan” like Wil suggests in order to compete.}

cbriggs

Great post, Wil. I completely agree with Deirdre. Honest friendraising (seeking mutual benefit) – and integrity in doing it – has consistently yielded amazing returns for me – sometimes many years later.}

deirdre

Very smart, and a lot more fun than dry old “networking”. But you have to keep your karma balance positive: don’t just think about what these people can do for you, but what YOU can do for THEM. I’ve “given away” many favors over the years, and am always thinking about making useful (to them) connections between people I know. I don’t think in terms of immediate return, but the returns have come in, in a big way, whether months or years later.}

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