It’s occurred to me in talking with the technology industry in Southern California, is that the “network” — of service providers, venture capitalists, nonprofit organizations, entrepreneurs, successful CEOs, and others — is a critical piece of the puzzle for entrepreneurs. What I mean by “Network” is not the “I went to an event and passed out business cards” — but instead, is the informal connections between people in the technology industry here who have a vested interest in helping entrepreneurs take their companies to the next level. Whether that’s pointing new entrepreneurs in the right direction–toward an attorney, an angel, or venture capitalist–or whether it’s helping a small company grow bigger–there’s a lot of people “behind the scenes” working to help entrepreneurs succeed.
A few years ago, Dr. Elissa Grossman, and Assistant Professor at Baruch College (who has also been at USC and UCLA) ran a study of entrepreneurs in Southern California, focusing on how entrepreneurs build their social networks. She found that success of early stage founders and venture was correlated with how they networked with others.
I’ve found that there is a fairly close network (roughly clustered by geography) of service providers, venture capitalists, associations, and others who tend to service the emerging stage companies here–and that the more successful companies tend to be pulled into that network earlier. I talked with Jim Armstrong, a VC at Clearstone Ventures last year (Clearstone is a sponsor of socalTECH), and he talks about the idea of a venture capital ecosystem — the VC syndicates — which make deals happen in the area.
How this works, for venture capitalists — is if you connect with a venture capitalist who likes your idea, your idea will be extended out to a number of other firms (the syndicate) who that venture capitalist trusts and typically likes to share deals with.
How can a network help? Well, it rapidly accelerates getting all of the many pieces of running a company in place — generally there are well-worn relationships which, once you’re tapped and “vetted” into the network, to put other providers into place. So, the typical pattern is you find an attorney who focuses on venture investments in the area, and they might refer you to an angel or venture investor — and in turn, there are a slew of other service providers (real estate, recruiting, human resources, banking, insurance, etc.) who are roughly linked. Any of those providers might be a link into the network–if for example you approach a VC first, it’s likely they’ll also connect you with the bankers, recruiters, etc. they like to work with.
There’s also an important network among entrepreneurs. The most successful entrepeneurs — those who have started, grown a business, and typically had a great exit through an acquisition or IPO–can be key not only in business advice and guidance, but also getting your company in the door with venture capitalists.
So what does this mean for an entrepreneur? Well, it means that networking — with the key players in the industry here, not willy nilly — is a critical piece of getting your venture off the ground, and in many cases, funded. It’s not going to events and “networking”, so much, as finding people who are “in the network”. Some of those folks do frequent events, but often it’s connecting into groups like the Tech Coast Angels or Pasadena Angels — who are experts and connecting people into the network of venture capital and service providers — or into efforts like the Business Technology Center of Los Angeles or OCTANe’s LaunchPad program.
One way in which we’re trying to help is creating ranked lists of service providers (for example, corporate attorneys)- where the providers are listed by the clients they have in the high tech space in the area. If we’ve missed firms, or you want to be included, please let me know. Or, if you just want to share who you find are the best people in the area to help entrepreneurs, I’d love to hear it.
