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Venturing out to Social Media posted on June 25, 2009

By all accounts, social media tools like LinkedIn and Twitter have proven to be of significant business value for companies seeking to acquire new leads and potential partners. The Internet is awash with thought pieces and “how-to” articles for organizations to get started.

By Reid Carr

But despite the rage, venture capital and private equity investors have largely resisted embracing these new technologies for their work. Possible explanations include a belief it would not help identify potential opportunities or tip off competing firms as to their strategy and approach. While certainly understandable, reality shows that these concerns are largely overblown and potentially no more hazardous than sending a traditional e-mail. The benefits of leveraging social media tools far outweigh the risks.

What VC firms can get out of it
At its fundamental core, LinkedIn, Twitter, Facebook and other such tools are the online equivalent of an industry networking event; people with like-minded interests and complimentary services getting together to exchange ideas, obtain feedback and, quite possibly, conduct business. The difference lies in its reach; LinkedIn and Facebook can help investors and venture capitalists connect people at orders of magnitude above what they could possibly do at a two-hour breakfast meeting.

That is not at all to say that face-to-face discussions are no longer relevant; far from it. However, social media tools can expand the ability for interested parties beyond their physical limitations. LinkedIn and Twitter can also directly support their “ground game” of in-person interaction in a number of ways, including:

- Providing key information and insights on trends and opportunities not readily identified by traditional means.

- Ability to recognize up and coming companies and entrepreneurs who may be in a position to capitalize on these trends.

- Validate conclusions and data obtained elsewhere.

How to use social media
The key here is not whether to use social media tools, but rather how best to use them, and as important, how not to leverage these systems. That discussion alone could expand several articles and still not cover everything. So instead, here are some general guidelines to help get a social media novice started.

- Choose your friends carefully on any platform like LinkedIn or Twitter in the same manner as in any other professional circles. While it’s easier to accept an invitation to connect with individuals on LinkedIn or “follow” folks on Twitter, it should not done lightly.

- Listen first for good quality information that undoubtedly exists on such platforms. There are several features within LinkedIn and Twitter that can alert venture capitalists to items of potential interest. Often times individuals feel forget this greatest attribute of the social media tools, and instead feel compelled to broadcast their news online without taking advantage of the wealth of information being provided by others.

- Converse, but don’t lecture when submitting status updates or Twitter “tweets.” Such postings could appear disingenuous and not of value to the people an investor would find beneficial to reach. Be sure to offer ideas and ask for perspectives. Good information and business opportunities will surely come in return.

The main takeaway point to all of this is that social media should be leveraged by venture capitalists and investors in similar fashion to participating at a network event or a professional organization. Success can be measured in the same way. As important, the time to get into social media for investors is now, because they may be leaving money on the table if they don’t.

This article is written in advance of the San Diego Venture Group’s June 25 breakfast event featuring a special keynote address by social media expert, entrepreneur and venture capitalist Guy Kawasaki at the Hilton Torrey Pines hotel. For more information or to register for the event, visit www.sdvg.org.

About the author: Reid Carr is president of Red Door Interactive, an Internet Presence Management firm with offices in San Diego and Denver that helps organizations profit from their Web initiatives. Clients include Garden Fresh Corp, Overstock.com, Rubio’s and Cricket Communications.