The Importance of Networking

This is the Chapter 14 of my e-book Silicon Valley for Foreigners, that can be downloaded for free on www.siliconvalleybook.com or purchased for $2.99 on the iBookStore and Kindle. A new chapter will be posted on this blog every week.

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Having access to the right people is fundamental to thriving in any ecosystem. In Silicon Valley, it is no different, but expanding your networking here can be tricky.

On the one hand, meeting new contacts is relatively easy and frictionless. People are accessible, approachable, and can be reached directly. On the other hand, if you really want to build a powerful networking and be remembered by executives, investors, and entrepreneurs, you must be introduced by someone with impeccable reputation. The more credibility the introducer has, the more seriously you will be taken by other players in the ecosystem.

Let’s imagine you have just arrived in the Valley and are working on a technology beneficial to WhatsApp. You wish to meet the founder of WhatsApp, Jan Koum, to discuss business opportunities. The best way to have the meeting set up is through an introduction from someone he trusts dearly.

Your first task is to find out who that person may be and assess what is his or her reputation with Jan. Your contact’s homework is to assess if the meeting has a good value proposition for both sides and, if so, proceed with the intro.

If the meeting goes well, you and the introducer will have your reputations boosted. Jan will be happy, and next time he will remember the introducer as a reliable and trustworthy party. If the meeting is a waste of time, the introducer’s reputation takes a hit. The introducer, in this example, has a lot of responsibility as he or she becomes a guarantor for a potential good meeting.

If you have wondered why, often times, friends who live in Silicon Valley are not helpful to make introductions, now you can better understand their decision. They may have assessed the meeting would not add value for both sides and, thus, hurt their reputation.

It may sound as nonsense for outsiders, but after being part of the Silicon Valley ecosystem for so many years, I can attest this unique albeit archaic system really works. This is one of those things that seems easy to understand but very difficult to master. The good news is that no one asks for favors or charge fees to introduce people, which should be the norm in all tech ecosystems.

Of course, like anywhere else, it is entirely possible to make cold calls and schedule meetings through LinkedIn, at events or parties. However, the chances of people taking you seriously diminishes dramatically.

The principle of being introduced by a reputable third party should be applied to anything done in the Valley like raising money. Hypothetically, if you have Peter Thiel as your angel investor and your company is doing really well, it would be more efficient to ask Peter to introduce you to venture capitalists than knocking their doors yourself.

This dependence on intros from certain people also creates a system that becomes unfair and privileges the Silicon Valley elite. The former PayPal founding team is one great example of this behavior. Anyone who belonged to the PayPal mafia automatically gets faster access to new deals and boost the credibility of their invested startups. Venture capitalists, often times, invest in average startups referred by “rock stars” in spite of other startups with better talent or traction.

In the venture capitalist’s view, the startup with no star power will have more difficulty raising future venture rounds and may end up failing. In this regard, Silicon Valley inherits the worst traits of ecosystems such as Hollywood or Wall Street, where the ones in power do minimal efforts to generate more money and power to themselves.

Fortunately, this is changing due to the proliferation of accelerators and other successful entrepreneurs not tied to “mafias.”