Saturday, January 15, 2011

Name the Big Three Social Networks for Business

With the advent of social networking sites like LinkedIn, Twitter, and Facebook, Internet usage has totally morphed, from a serious business medium, to a social and fun medium that still means business. Regular people now build business applications with “mashup” technology, rather than hiring programmers.

I’m a technology follower from the early days of the Internet, so a couple of years ago I decided to dive into this new world and check it out (who even heard of blogging or mashups ten years ago). I realized quickly that this new world isn’t just for the social life of Gen-Y – it is a sea change for everyone in business, especially startups.

After any earthquake event, the first thing I try to do is to step back, get the lay of the land, and derive some guidelines for getting around efficiently, while avoiding personal injury (I spent some years in California). Here are the current big three in social networking for business:

  1. Facebook is biggest, moving from social to business. Currently, the biggest site in numbers is Facebook with over 500 million active users. 50% of active users log on to Facebook in any given day. Their primary visitors in the past have been Gen-Y socializers, but the fastest growing segment now is business people, and discussion groups for business, like “Facebook for Business” with 56,250 members.

  2. LinkedIn caters to senior business professionals. The largest site traditionally targeted at business people is LinkedIn, with current numbers exceeding 80 million members. This one is a “must” for every serious business professional and executive out there today. You can join groups with your specific interests, participate in discussions or not, and highlight your business.

  3. Twitter for business and networking is ‘hot’. This site is for text-messaging on the Internet, with about 100 million unique visitors per month, and was first popular for social updates and gossip. Now it’s the source of business leads and networking for thousands of people, and the source of the breaking world news for everyone. You need to be there.

Obviously, there are many others that you should evaluation, based on your geographic location, type of business, and personal interests. Here is my perspective on a few of them:

  • MySpace is for tweens, forget it. The third biggest site (just passed by Twitter) is MySpace, with about 95 million unique visitors per month. They have groups for business and entrepreneurs, but the culture is primarily teen and pre-teen. You will find business advertising there, but minimal business networking.
  • It’s not all about numbers. There are many more social networks which have good traction and a more specialized focus in the business networking world. Examples include Ryze, Plaxo, Orkut, RedWire, and Ecademy. In general, their membership is focused by geography, industry, or culture, so the value can be excellent.
  • Business networking today starts with social networks. Social networking sites are more effective and efficient than attending all those boring business cocktail mixers and conventions. I’ll even be so bold as to say that if you aren’t on any of these sites, you are way behind the curve in business networking today.
  • Protocols for each site are different. There is a hierarchy and a culture to social networking sites on the Internet, just like there always has been with professional business organizations and clubs. There are so many sites, so you need to choose wisely, and learn the rules for each. Most are free, so you can do serious business networking around the world without signing up for any of the fee services.

Maybe because the cost of entry is low, I see a swarm of startups today busy with add-ons, and building new offerings. It’s a brave new world, for me an exciting challenge and fun to explore. But like every good explorer, I’m asking everyone I meet what’s around the next corner. Are you there today, and what do you predict for tomorrow?

Marty Zwilling



Sunday, January 9, 2011

Real Entrepreneurs Avoid Multi-Level Marketing

Many self-proclaimed entrepreneurs send me invitations and accolades to join their favorite Multi-Level Marketing (MLM) or Network Marketing company, but these all sound like “get rich quick” schemes to me. For me, the essence of an entrepreneur is creating something new and innovative, whereas an MLM is a traditional formula on an existing product with a high premium on pyramiding.

I know there are a few companies, like Mary Kay and Lia Sophia, who have a generally positive image, but there are many more, often built around some investment scheme, which continue to give this sector a bad image. If you scan the Internet, you will find dozens of negative articles, like “What's Wrong With Multi-Level Marketing?”, but very few singing their praises.

Technically speaking, pyramiding is an illegal practice of a company that solicits their members to recruit more members, more than selling the product. In turn, the primary source of income for its members is the number of members they have recruited instead of the products they have sold over time. Clearly, not all MLMs are pyramid schemes, but it all seems like a matter of degree.

If you insist on trying one of these MLM offers, the least you can do is look for proper business registration with BBB, toll free number, and proper address (no Post Office box). Also, you will need lots of family and friends to make it work. As a final step, check the MLM materials for one or more of these “red flags” that are associated with the worst of the offerings:

  1. Fee to "get your business started." If their business model is really from selling products, then up-front fees should be unnecessary and are inappropriate. Usually these are billed for education and training that consists of a few marketing brochures.

  2. Promise big money with little work. There are of course things that you can do to make money without having to work all that hard. But, it's just not possible for everyone who joins a business to be able to make so much money without working. Making money takes work.

  3. Purchases encouraged as "investment." Often times MLM companies want you to think that making purchases for products within the company will advance your status, or grow your business, more than satisfy sales.

  4. High income projections. Many companies love emphasizing how much you will make, but rarely mention how you are going to make it. MLM opportunities have proven historically to be, at best, a little better than a side income for most people.

  5. Money from recruiting. If they would rather have you recruit another distributor than a new customer, then their products are not what is driving the company. A company that is filled up with people but no products is still just a group of people, not a thriving company.

The Internet has made it so easy now. In the old days you had to actually visit people, or at least call them, to pitch your fabulous new opportunity. Face-to-face marketing is still practiced, but it is not so common these days. Besides, no one really loves the idea of having someone over, so they go online where everyone can be as safe as they want. They create sites with videos, testimonials, and pictures.

I will admit that I don’t like the business model of paying people to solicit other people. In fact, I’m convinced that the phrase “Multi-Level Marketing” and “Network Marketing” were invented as sanitized terms after Amway and others were charged with “pyramiding” back in the early 1970s.

Yet there must be something to the business model, since I see some big business icons like Donald Trump are joining in the MLM parade. I’ve written about these before, and I’m still looking for one that feels entrepreneurial. Who has a convincing story that will make me feel good and pure as I recommend their MLM to my best startup clients? Do you love them or hate them?

Marty Zwilling



Saturday, January 8, 2011

The Renewable Energy Sector is Fundable in 2011

My picks for favorite startup sectors to improve your fundability in the new year include green, biotech, and renewable energy (also called alternative energy or sustainable energy). In previous articles, I’ve put some definition around the green and biotech investment categories, so I’ll try to do the same here for renewable energy.

Renewable energy is any source that can be produced cleanly, will not disappear like fossil fuels, and is less polluting. The Clean Technology venture capital sector, which includes alternative energy, soared 68 per cent year-on-year during the first quarter of 2010. I expect another increase this year. Here are the key components, as summarized by the New Alternatives Fund:

  1. Solar power. Solar cells produce electricity from the sun. Conversion efficiency of silicon cells has increased from 4% in the early eighties to over 20% for the latest technologies. The cells create no pollution when they generate electricity. They are not yet as cost effective as coal-generated electricity, but costs keep declining and efficiency is increasing.

  2. Wind power.  The latest turbine technologies have resulted in wind-produced energy becoming more cost efficient, and more widespread. New wind energy development is essentially cost-competitive with conventional energy technologies.

  3. Hydropower. This technology is clean but limited by geography. This is already an important source of renewable electricity. More attention is going to low-impact and "run-of-the-river" hydropower, which does not have the ecological problems of older dams.

  4. Ocean energy. Technologists predict that wave action, current, tidal movement and temperature differential will become an outstanding form of clean energy. Ocean energy has a big advantage because the timing of currents and waves are understood and reliable.

  5. Geothermal energy. Geothermal energy is produced by heat from sources below the Earth's surface. Steam created by these underground heat sources is used to spin turbines for electricity generation.

  6. Biomass energy. This is a broad category encompassing a variety of fuels produced from biological sources.

    • Bio-diesel can be created from used or virgin plant oil. Production and testing today center around rapeseed oil, soybeans, sunflower oil. Overall, bio-diesel works cleaner than petroleum-based diesel fuel.

    • Ethanol is derived from agricultural products, including corn, wheat, fruit, wine, and various kinds of cellulose stalks and wood chips. The techniques are steadily improving. Ethanol can be mixed with gasoline to minimize engine changes.

    • Waste gas (methane), emitted from landfills, breweries, waste water, animal sewage and coal mines, provides almost free fuel for stationary fuel cells and conventional gas generators.

    • Hydrogen is the ideal alternative fuel, since it releases no toxins into the air. It can be derived for waste gas, or mixed with natural gas in hybrid fuels. Liquid hydrogen, the preferred form of hydrogen, still requires more storage space and pressure than other fuels.

There are many other technologies which may be lumped into this category, including combustibles, municipal waste, and even nuclear energy. There is overlap between this category and the green category, as it relates to global warming and environmental impact.

Nevertheless, if you are looking for a hot sector to help you recover from tough economic times, get you tagged as a world leader, and increase your probabilities for funding support, put some energy into this one in 2011.

Marty Zwilling