The Value of Friend-Raising(foundread.com)
foundread.com
The Value of Friend-Raising
http://www.foundread.com/view/the-value-of-friend
1 comments
Interesting, but I don't know if I like the idea of someone befriending me simply because they are "networking" for their business. Then again it makes sense to work with the people you like, so I suppose there is some truth to it.
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 X 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 X 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 (parent of Found|Read), VentureBeat, and TechCrunch. I've now written for all four of these sites!
By simply picking up the phone and forging relationships with Om, Matt and Mike 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 planXin 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.