We were surprised recently to hear of three new expert networks. Who would be foolhardy enough to start an expert network? Shouldn’t the expert network industry be shrinking not expanding? As it turns out, the new ventures differ from current expert networks and suggest that the expert network concept will endure, albeit in different forms.
i4cp (Institute for Corporate Productivity), a human resources networking company, announced in October that it was launching an expert network: “the i4cp Expert Network, which enables unparalleled access to thousands of experts on people strategies.” The expert network is targeted to human resources professionals. However, the business model differs from expert networks serving institutional investors. Companies accessing the firms expert network pay a subscription fee, and there is no fee paid to the ‘experts’, who are other human resources professionals belonging to the network.
i4cp’s approach grafts an expert network onto social networking, which is something LinkedIn considered doing at one point, before deciding in 2009 that it would rather partner with an existing expert network (DeMatteo Monnes).
Evisors is a recent startup formed by recent business school graduates, which is designed to set up expert consultations centered on specific topical areas. Evisors initially focused on career advice by connecting users with former employees and interviewers at sought-after employers. They then expanded into admissions, test prep, and entrepreneurship advice. Like Aristotle Circle, which also focuses on the educational market, the business model is the same as a classic expert network, charging users by the hour for phone and email consultations, paying experts for their time, and pocketing the difference. Evisors announced in November 2011 it has raised a seed round of $600,000 from from Nebula Ventures, the venture capital Universum Global, as well as angel investors.
Evisors doesn’t change the fundamental expert network business model, but it goes further than the traditional expert network segmentation of experts by sector and/or geography. Evisors organizes its ‘content’ (ie, experts) into specific topic areas such as admissions or career advice. Each expert is classified by ‘skills’ such as ‘business school admissions’, ‘business plans’, or ‘job search’ making it easier for users to identify experts on specific topics of interest.
LifeSci Advisors is investor relations firm specializing in the healthcare sector which provides equity research on a paid-for basis. The firm performs “market research by surveying members of our proprietary Expert Network, which contains thousands of physicians and healthcare industry personnel organized by specialty.” The firm was started in early 2010 by a former hedge fund analyst, Andrew McDonald, who was previously senior biotechnology analyst at Great Point Partners, a dedicated life science hedge fund.
According to Andrew, the firm’s expert network is used to conduct surveys initiated by LifeSci and distributed to anyone who registers on the firm’s website. The surveys are used to gain access to the buy side for the firm’s investor relations services, such as non-deal roadshows. The website mentions telephone consultations with experts, but these are performed by LifeSci analysts, not offered to clients.
Since it does not facilitate consultations, LifeSci Advisors doesn’t meet our criteria as an expert network. However, it is interesting that the firm promotes its proprietary expert network to the buy side, suggesting that access to industry experts has enduring appeal to investors.
Wither Expert Networks?
So are expert networks expanding or withering? Without a doubt, they have been shrinking. The bonanza of business from U.S. institutional investors is over. Moreover, because of compliance concerns, market share in the U.S. is concentrating in the very largest expert networks, with Gerson Lehrman Group (GLG) particularly well positioned because of their emphasis on compliance pre-dating the insider trading investigations.
At their peak in 2009, there were over forty-five expert networks. We are aware of twelve expert networks that have exited the business, some through consolidation such as Business Connect China’s acquisition of Evalueserve’s Circle of Experts and merger with Tribeca Insights, forming Advantus Global.
There are another nine expert networks which are on the edge. In some cases, expert networks are quietly shifting their efforts to other activities, without formally shutting down. They will service existing clients, but are not seeking new clients, as principals pursue other opportunities.
Whither Expert Networks?
As i4cp, Evisors and LifeSci Advisors illustrate, the expert network concept is alive and well. Outside the U.S., usage of expert networks is growing among institutional investors, particularly in Asia. Unfortunately for large global expert networks, the non-U.S. growth does not offset declines in the U.S.
Although private equity firms require rigorous compliance infrastructure, their usage of expert networks has not been seriously impacted. Corporate usage also continues to grow, including usage by consulting firms, and those corporations which use expert networks as a substitute for consulting projects. And then you have firms like Evisors and Aristotle Circle which are adapting the expert network model for hot consumer topics like education or career advice.
We expect the expert network concept will continue to morph, finding synergies with social networking businesses. We have noted in the past Gerson Lehrman’s strategic intent to remodel itself as a social media firm providing ‘membership-based marketplace for business expertise.’ GLG is not just paying lip service, having launched ‘G+’ a Quora-like service that draws on its network of experts to answer specific questions from users.
Expert networks are not going away, but there is no question that the future industry will look very different going forward.