When David Hernandez got laid off from Enron (BusinessWeek.com, 12/17/01) in late 2001, he decided to start his own company to sell retail electricity in deregulated states. Early on, he sat down with David Gallagher, a fellow alumnus of New York University's Stern School of Business who worked at Deutsche Bank (DB), to get advice. Five years later, Hernandez's company secured a $150 million credit facility from Deutsche Bank.
"I definitely attribute and credit the relationship for having had someone take the time to understand our business, understand our challenges, and understand our needs," says Hernandez, chief executive officer of Liberty Power. The firm, with just over 100 employees, had $193 million in revenue last year—success that Hernandez, who started the company with three partners and built his management team largely through his alumni network, says wouldn't have been possible without connections he made in college and graduate school.
Entrepreneurs who need investors, advisers, and employees can tap their alumni networks to find those key connections. Sharing an alma mater can be the crucial link that gets someone to return a phone call. Alumni networks have long been a source of business contacts, but the connection can be invaluable for startups, where establishing trust is key to getting people to jump on board. And online social networks, including some specifically for alumni, entrepreneurs can find old classmates more easily than ever.
A Trusted Source
Hernandez, who started Liberty Power with three partners, built his management team largely through his alumni network. Alumni connections can be particularly useful for early-stage entrepreneurs according to Diane Darling, author of The Networking Survival Guide. Darling says entrepreneurs shouldn't try to turn their connections directly into clients, investors, or employees. Instead, they should approach an alumni network as a medium to spread the word about their situation through trusted sources.
For example, instead of asking a contact to invest (BusinessWeek.com, Oct./Nov. 2007), she suggests entrepreneurs ask, "Do you know people who invest, who are interested in small businesses? If you know somebody, will you let him know about this opportunity?" The key to tapping a connection is to make it comfortable for that person to say no, Darling says.
And while online social networks (BusinessWeek.com, June/July, 2007) have made it easier to find people you went to school with, Darling says the online tools are no substitute for a personal communication. "Make it unique. Don't send out a mass e-mail," she says.
One company has made a business out of connecting alumni online for business purposes. As an undergraduate at Stanford, Stephen Loughlin founded Affinity Circles in 2002 to build online alumni networks for universities. The 25-person company now has 140 clients, from University of California Berkeley to Florida State. Members send messages about jobs or other opportunities to fellow alumni, universities send announcements to members, and outside companies like Oracle (ORCL) and Merrill Lynch (MER) pay to send job postings to potential candidates.
Loughlin says users trust content they get through Affinity Circles because each network is a "walled garden" centered around one school, rather than an open social network. "Unlike LinkedIn or Facebook, which require you to build out an individual network, you can go in to this exclusive network," he says. The Palo Alto company, which recruits heavily out of Stanford, uses its own product to find new hires.
Mario Spanicciati, a 2002 graduate of Cornell University, has put his alumni network to work for Blackline Systems, a six-year-old financial software company based in Los Angeles. As Blackline's vice-president for operations, Spanicciati has found four key employees through his Cornell network, either graduates or people referred by other alumni. The 20-person company also found a financial advisory firm and a public relations firm through Cornell connections.
Connections Can't Hurt
"Anytime that we need to hire or we're looking for advice or we're considering something, I am constantly going out to that network to look for people who've done it before and getting the right advice," Spanicciati says. One particularly useful tool is the Cornell Silicon Valley network, a group of about 2,000 active alumni he can tap into through an e-mail list and events. Now that Blackline, which is self-funded and profitable, is considering seeking venture funding (BusinessWeek.com, 2/1/08), Spanicciati is turning to alumni again.
He even credits a college connection with helping to land a customer who was considering going with a competitor. Through a mutual friend from school, "I managed to speak with an executive at the company, who then spoke to the head of purchasing," he says. "I can't say that's why we got the contract, but I can say it didn't hurt."
The Relationship Smooths the Way
But while alumni networks can provide a wealth of key connections to entrepreneurs, there's a fine line between tapping the network and abusing it. Spanicciati says entrepreneurs shouldn't count on alumni for direct sales. "You don't want to go into somewhere and say buy this because you're an alum," he says. And Darling warns entrepreneurs against going to alumni only when they need something. "The No. 1 thing with networking is you want to build relationships before you need them," she says.
Still, sharing an alma mater can provide a base level of trust for entrepreneurs to start a conversation with someone who might become a business partner, an investor, or a key employee. Many small companies could not succeed without those connections. As Hernandez says, "When you're first starting out in any endeavor, trust is incredibly pivotal. Just having that relationship makes everything smoother."