New York start­up Local­Maven is mak­ing it easy for local busi­ness­es to gen­er­ate word-of-mouth refer­rals with a sim­ple incen­tive: cash.

Upon read­ing this blunt sum­ma­ry, the more inquir­ing prod­uct man­ag­er will want to know how this idea actu­al­ly works. Let’s begin at the beginning.

Frus­tra­tion, the moth­er of invention

The com­pa­ny, which offi­cial­ly launched just yes­ter­day (8^th July), is the brain­child of erst­while events busi­ness exec­u­tive Arnon Rosan, and he hatched the idea out of his grow­ing frus­tra­tion that no reli­able means exist­ed to track or reward pos­i­tive refer­rals. The only way he’d find out whether a rec­om­men­da­tion he’d giv­en for, say, a good tent com­pa­ny actu­al­ly went any­where was if he asked about it lat­er. And, even though his refer­ral could have gen­er­at­ed a good­ly slice of busi­ness rev­enue for the ser­vice provider, his only reward (if he was lucky) might be to be tak­en out for dinner.

The result of these irk­some vex­a­tions was a unique plat­form capa­ble of lit­er­al­ly orga­niz­ing an infor­mal refer­ral econ­o­my, oper­at­ing across all mar­ket seg­ments and indus­tries (not just Rosan’s spe­cial­ty, events busi­ness­es) and acces­si­ble any­where in the world with an inter­net connection.

An online refer­rals marketplace

Now we can come back to our queru­lous prod­uct manager’s inquiry. It works like this: Rosan is recruit­ing a broad net­work of trust­ed experts or “mavens”, from the friends you always turn to for rec­om­men­da­tions to the vet­er­an hotel concierge (held out by Rosan as “the ulti­mate exam­ple of a maven”). Busi­ness then use LocalMaven’s plat­form – effec­tive­ly, an online mar­ket­place — to access those mavens, pay­ing them a com­mis­sion for their efforts in pro­mot­ing offers such as dis­counts or oth­er deals.

For their part, the mavens use a unique pro­mo­tion­al code when­ev­er they rec­om­mend a deal to some­one else (friend, col­league, ran­dom passer­by, etc.); as our can­ny prod­uct man­ag­er will imme­di­ate­ly rec­og­nize, this makes it easy to track which rec­om­men­da­tions actu­al­ly gen­er­ate sales. The maven gets a com­mis­sion for each suc­cess­ful sale, bring­ing up Local­Maven on their smart­phones to search for pro­mo­tions when­ev­er a rec­om­men­da­tion oppor­tu­ni­ty presents itself and giv­ing the recip­i­ent a refer­ral code there and then. Busi­ness­es can decide the com­mis­sions they’re pre­pared to pay and how exclu­sive their offer will be.

Local­Mavens has raised seed fund­ing of $1.4 mil­lion but has not dis­closed the names of investors.