Social Networking: Calling for Customers

One entrepreneur learns from failure and goes on to build a wildly successful online network

Written by Annette Bourdeau

When Sarah Prevette’s first entrepreneurial venture failed in 2006, she realized there’s no such thing as an overnight success in business. Her ill-fated startup, Upinion, was a social-networking website on which teens and tweens could share their opinions about pop culture. In hindsight, Prevette can pinpoint exactly where she went wrong: “I built it, turned on the lights and wondered why nobody was coming to my party.”

Last August, Prevette launched Sprouter, a social-networking site intended to create a global online community in which business owners connect and share advice. Prevette wants Toronto-based Sprouter to attract five million active users, and become to entrepreneur networks what Google is to search and YouTube is to video — all within the next two years. It’s a lofty ambition, considering Sprouter’s big competition, the site is not yet monetized and Prevette’s seed capital is quickly running out.

Prevette’s idea for Sprouter was born out of personal experience. “As a young entrepreneur, you don’t have a big network around you, and you don’t have a Rolodex to rely on,” she says. “I wanted to build something that entrepreneurs could instantly plug into and find the right people and answers to questions on a day-to-day basis.”

Finding capital wasn’t a challenge for Prevette. She floated the idea to investors in her personal network, and quickly found enough cash (she won’t reveal how much) from people who “believed in the vision and really wanted to give back to the entrepreneurial community they had participated in for the past few decades.”

Prevette hired a Web developer in October 2008 and began building the first incarnation of Sprouter, called Red Wire, an e-marketplace for entrepreneurs’ products and services. But, she says, testing soon revealed a bigger opportunity in helping entrepreneurs exchange information, advice and ideas with each other.

Prevette switched gears and launched a beta version of Sprouter last August. Rather than launching a fleshed-out site, as she had with Upinion, Prevette beta-tested a bare-bones version of Sprouter, allowing users to indicate which features and functions they wanted. An oh-so-entrepreneurial demand for brevity and speed inspired Prevette to adapt the concept behind Twitter and other microblogging services to the needs of busy entrepreneurs. As with Twitter, members can receive feedback to their posts in real time, but no post can be more than 140 characters in length. Users can access the posts and questions of all other Sprouter users, or choose to “follow” the activity of specific people. A unique filtering function allows members to put their followers into categories, then sort their followees that way — say, “San Francisco” to see content only from people in that area, or “marketing” to segment people who tend to post marketing-related information or questions. Sprouter also offers an events calendar, allowing users to post and search for events by keyword.

Prevette hasn’t counted on the wild popularity of Twitter to transfer to Sprouter. One of her three employees is a community manager whose job is to gather member feedback. She’ll even sometimes track down members to respond to user-generated questions that go unanswered. “We have to make sure that users have a positive experience so they’ll stay,” says Prevette. “Having someone assigned full-time to engage them makes a difference.”

Prevette is deploying a low-cost, grassroots marketing campaign that includes establishing relationships with local entrepreneur accociations and hosting Sprout Ups — which, ironically, are in-person events at which entrepreneurs network and listen to high-profile speakers. (Prevette says the Sprout Ups are laying the groundwork for a potential offline expansion of Sprouter.) Monthly Sprout Ups in Toronto draw crowds of up to 300, while events outside of Canada have attracted audiences of up to 150. Public relations efforts have landed coverage in the New York Times, National Post and Mashable, a popular news blog focused on social media.

Such efforts are crucial, because Sprouter is up against some established and well-funded competitors. Irvine, Calif.-based Entrepreneur Media Inc., the publisher of Entrepreneur magazine, hosts Entrepreneur Connect, which has almost 40,000 registered users. There’s also PartnerUp, which launched in 2005 and has a more substantial user base of about 170,000. But those sites barely register on Prevette’s radar. She considers social-networking behemoths LinkedIn, Twitter and Facebook her real competitors — but says Sprouter will rise above them because of its unique combination of features and niche users. “Sprouter filters out the noise of the rest of the social-networking world,” says Prevette.

Like many Web 2.0 companies, Sprouter employs a “freemium” business model. The ideas is to offer basic services for free — in Sprouter’s case, the ability to create a profile and connect with other users — while charging a premium for advanced or special features. And Prevette is considering spinoff products and services to be sold to non-members, such as a white-label tool for entrepreneurial organizations to manage their memberships and engage their members in conversation and formal mentorship.

Prevette says she has seen “significant interest” from corporate vendors in using Sprouter as an advertising vehicle. She’ll also consider offering sponsorship opportunities for the Sprout Up events. “There’s no lack of opportunities for us to be able to monetize,” says Prevette. “But, really, we need to make sure that the value is there for our community, and that we don’t alienate them, first and foremost. So, we’ll do what makes sense. We’ll go where the money is.” Prevette won’t reveal Sprouter’s current membership numbers or the number she thinks the site will need before it becomes a viable advertising medium.

The money can’t start rolling in soon enough. Prevette estimates she has about six months left before her seed money runs out. Still, she’s optimistic. After all, she knows what it’s like to be at the helm of a sinking ship. “At this point,” says Prevette, “I know the difference between panic and elation!”

What the experts say

PROFIT asked a social-media thought leader and a professor of entrepreneurship about Sprouter’s prospects for success

Maggie Fox
Founder & CEO, Social Media Group
Dundas, Ont.

“As an entrepreneur, I love the idea of Sprouter. It fills a huge need in the lives of budding businesspeople who don’t have the networks of someone more established. I especially love the “IRL” (in real life) events it’s running; face-to-face interactions can be a major success factor for any community. However, I wonder if the monetization model will carry the weight of a site that could eventually have millions of members globally. Is the market for a white-label version strong enough? Can Sprouter generate enough revenue via display advertising? I’m not sure what numbers Sprouter will need to get to in order to see this momentum, but it may be that a membership campaign is required over the next six months to get it to critical mass. Regardless, Sprouter’s key to success will be value. If enough people join the network, the value will increase, attracting more people who create valuable content. Rinse and repeat!”

Elspeth Murray
CIBC Teaching Fellow in Entrepreneurship, Queen’s School of Business
Kingston, Ont.

“Prevette is onto something. The social-media space is hot, with everyone trying to stake out some territory and figure out the monetization aspect later. Focusing on entrepreneurs, immediate feedback and Twitter-style communication are great ideas. The business is well grounded in first-hand experience as well as contact with real customers€¹both great assets. The game Prevette now has to win is one of getting big enough, fast enough. YouTube and PayPal didn’t win because they tried to do it all themselves; rather, they hitched their wagons to MySpace and eBay, respectively. The cost of customer acquisition is just too high if you go it alone. Prevette needs to think about who her big sister might be. On the monetization side, it will come. Prevette should focus on building critical mass and creating interim revenue streams to stay alive until the monetization epiphany occurs.”

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