Two degrees of separation
August 13th, 2008 by Benjamin KuoIt’s occurred to me lately that there’s really only two degrees of separation in Southern California’s technology industry. Degrees of separation — as in “six degrees of separation” — is the idea that people are only a few people away from everyone else in the world. (ie, I know you, you know person X, they know person Y).
Here in Southern California’s technology industry, I think it’s really two degrees of separation between most folks. I’ve been hit by a rash of what I think of as “bounce back” referrals lately, where I am getting people who are referring people to me who I’ve known for a long time. Heck, I’ve even done it myself a few times. It’s really surprising given the number of people working in the technology industry here how close everyone really is, in terms of personal relationships.
Although I do know quite a few people in the industry — given the number of people who use the web site and who I talk to all the time keeping tabs on things — I think it’s the case that if you talk to any outwardly facing person at a company here, a venture capitalist, or active angel investor they probably know a bunch of people you know, as well.
So why should you care? Thinking about the entrepreneurs I’ve talked to, the fact that there are only a small number of degrees of separation means several things:
1. Your reputation precedes you
How you’re looked upon by investors can often be already influenced by other investors. Almost all of the venture investors and angels in Southern California — heck, even those Bay Area investors investing here — generally talk to each other a lot. So, if you’ve got a hot company, they’ve probably heard of you. And — unfortunately — if you don’t, they might have heard of you to.
From an investor stand point, this is also true — if an entrepreneur has a bad experience at your firm, it’s likely they’ll also tell that to other entrepreneurs they talk to.
2. It doesn’t pay to badmouth anyone — even if they deserve it
Just like a small town, bad mouthing someone seems to get around. I hear entrepreneurs who complain will complain — in no small terms — about a VC or angel investor — and not realize that the VC they’re telling me they are pitching the next day are very close friends with the VC they are badmouthing. Nothing kills an investment than you insulting a VC’s best friend, no matter the attractiveness of your technology or opportunity. I’m constantly amazed by entrepreneurs who will complain in public forums about VCs, because–if they’re ever hoping to raise capital again –it’s bound to be only negative for the entrepreneur.
3. More people know what you’re doing than you think
Given how small the community is, if your firm is doing something big — whether that’s a layoff, acquiring someone else, etc. — if you’ve got loose lips within your company, it’s likely other folks know. Those might be competitors, potential employees, or the press. This is even true on a personal level, with resumes — one reason we have a job board — but not a resume board — is that the likelihood of your HR person finding your resume in a pile of resumes from Southern California are pretty darn likely. And you wouldn’t want that to happen.
4. Resources are only a step away
On the positive side, this connectedness also means that it’s likely that someone you know can connect you with lots of positive resources for your venture. For example, your real estate broker likely knows an attorney who likely knows an auditing firm that knows a VC, etc. Once you’ve connected into the ecosystem surrounding startups here, it’s not the same battle to find the (many) other resources serving the industry.
