Can Social Networking Sites Help Your Biz?

Paul Allen, managing partner of business incubator Infobase Venturesin Provo, Utah, likes to help entrepreneurs with advice on business plans and raising capital. But as a frequent lecturer at business schools and conferences, he recently found himself inundated with requests. So he made a new rule: If you're not a member of the LinkedIn network with a minimum of 10 connections and two endorsements on the site, don't even bother calling him. "The most important thing for an entrepreneur is not necessarily what they know, but who they know," says Allen.

Allen's prerequisite underscores the growing popularity--and scope--of online business networking tools such as Palo Alto, California-based LinkedIn Corp. These sites allow members to build networks of friends and associates, as well as gain warm introductions to investors and potential clients. "It's really automating and streamlining the historic word-of-mouth introduction process, which tends to be the best source of investment opportunities," says LinkedIn member Chip Hazard, managing general partner at Boston-based VC firm IDG Ventures.