Ben Smith: Silicon Valley Is A Multi-Inning Game, Relationships Are How You Play

I heard two things recently.

“Silicon Valley is a multi-inning game, relationships matter.“ And.

“I am all business, I don’t care about relationships.”

The first statement came from a seasoned venture capitalist with 20 years of experience. His point is relationships matter because you play with the same people over and over again.

The second was from the founder and CEO of one of his companies.

Relationships are at the core of how Silicon Valley works.  When people talk about the “PayPal Mafia,” they refer to something beyond the shared learning of building PayPal. They are talking about the relationships that developed from shared experience.

I spent a lot of time looking at relationships when I reorganized and trained the Hewlett-Packard sales force in the late 90’s; when I founded the people search company Spoke.com, when I served on the boards, invested in or advised over 20 companies, and when I built a community of 1.7 million merchant-based relationships at MerchantCircle.com.  My most important observation is this: in business, and especially in the venture and startups worlds, relationships matter more than most anything else.

A lot of people think relationships are formed by hanging out on golf courses or by “conference rats” always shaking hands and handing around beers. What I have found is that Silicon Valley relationships are:

Based on sincere trust

In Silicon Valley, sincere trust does not mean doing whatever someone else wants or having everyone like your actions or decisions.  Sincere trust comes from operating in a transparent way and meeting your commitments to everyone, from your board to the most junior engineer.  Let’s put it this way, if an engineer feels like he needs to have someone check his options paperwork, you don’t have sincere trust. As one former Yahoo co-worker said to me of former Yahoo Executive Vice President Jeff Weiner (now LinkedIn CEO): “He was tough, but we knew what we were getting; he was transparently tough and you could trust what he said and did.”

Based on content

The valley values content and people who have something to contribute. You can’t build a real relationship in the valley without adding value to a conversation. This includes structuring a Series A term sheet and discussing the R squared of speed versus pages indexed by Google.

I have had a relationship with leading Silicon Valley attorney Gary Reback for almost 15 years.  I don’t think either of us ever “sold” the other anything, but we have spent 15 years discussing different issues and helping people out.

Based on shared experiences

The best trust and content sharing develops through shared experiences. If you and your team almost ran out of money, experienced a product failure, secured a big customer win, or sold a company, you learned a lot about sharing content and how people handle tough and joyous situations. At MerchantCircle, I had a few situations where team members made mistakes. The most notable was when someone accidently erased years of community forums.  If I terminated the person, I would have lost the education the team just went through and I would have lost something more important: the relationships that were built “getting through it.”

Based on common values

It is hard to have a deep relationship if you don’t have common values, especially when it comes to basics of how you do business. I have seen plenty of successful teams come from different cultural, educational and religious backgrounds – even seen Netscape DNA work well with Oracle DNA. They have to have similar values.

Of course relationships sometimes get a bad name in the valley. They can be used as an excuse not to do the right thing. A relationship focus does not mean:

  • Your buddy who is a partner in a venture firm is going to invest $10 million in your startup. He probably won’t;
  • You should hire your closest friends. That might not work. However, the people you do hire will probably become your friends;
  • Your board won’t fire you just because you are buddies. They will;
  • You won’t fire someone because of a long time relationship. You better, for their benefit and yours.

Silicon Valley Business is Relationships

Of course, we are all in the valley to innovate, get big stuff done, and, in the end, make big returns happen.  Relationships only matter if they help make these things occur. So I return to the quote: “I don’t care about relationships, I am all about business.” That might work in a transaction-based world, but never in the Silicon Valley. If you don’t have long-term relationships, you will:

  • Not be able to influence broad ecosystems to your point of view. Consider Marc Benioff at Salesforce.com as an example of how important this skill is for winning in the valley
  • Not have the best information about what is really happening. You will be flying blind the week a large change takes place in the Google ecosystem. Or you might not be at the table when the largest acquisition in the history of your space goes down.
  • Not be able to remove friction.  I have bought three companies with weeks of paperwork and diligence and had great experiences because of trusted relationships.  In these meetings, you hear things like: the “five big issues you need to worry about before you close this deal with us are.” I have seen situations without a relationship focus where $50,000 was spent to try to take $50,001 from someone.

In the end, it comes down to recognizing relationships matter in the Silicon Valley. Treat them like the 50-year investment they are.

(Ben T. Smith IV is a serial entrepreneur and investor and the co-founder of MerchantCircle.com and Spoke.com. He is available on Twitter at @bentsmithfour.)

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6 Comments

  • Ben -

    An extension of your “relationships” would be community. And, in the early stage community there must be a global, transparent and collaborative marketplace because the early stage is very much a world of relationships.

    Please review the static demo – http://www.earlystagemarketplace.com.

    I look forward to your thoughts on ESM.

    Thanks,

    Elliott Dahan

  • Solid article/tips … this “refresher course” comes in handy especially when you’re based East trying to find your way into circles in the Valley.

  • great article with a “common sense” analysis that should not be overlooked…but often is. I have been doing deals in the valley for almost 20 years and the best deal guys always establish a report and relationship with the team they are doing the deal with…remember deasl are about defining PARTNERS. I can recall countless deals where teams dig in to some serious trench warfare, wrongly thinking the end point of a deal is a signature.

    The beginning of the deal starts with the signature, and if you hate each other at that point it puts building the partnership off to a rocky start…seems so simple, yet so often forgotten by folks enamoured by the art of the deal…

  • Great article, Ben.

    I wonder if you remember me. We worked together briefly when I was trying to get funding for a company that I founded. If you’d like to maintain the relationship please ping me by email at skanga@.com

    Regards

    shiraz

  • What you’ll find from truly successful people is that they don’t need to shamelessly flaunt their “stats” or accomplishments. Anyone who is even considering taking Ben Smiths words on relationships at face value should talk to employees who worked with him at Spoke, and I’m assuming the same will ring true if you speak to people who worked under him at Merchant Circle. Do your due diligence on him if you plan on working with him.

  • [...] Valley is based on relationships. It’s a continuous game if you are thinking game theory. No Nash [...]

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