Aug. 17–The first generation of dot-com companies might be dead. But another one is sprouting.

Venture capitalists are opening up their wallets with caution to hot “social networking” start-ups, or those companies that help you connect with friends to help get ahead in romance or work. Many of the new companies are based in Silicon Valley or its environs.

Sunnyvale’s Friendster.com is a good example of the buzz. If you’re a single young professional, live in the Bay Area and haven’t heard of it, you’re in danger of, well, being left behind. The same goes for employers or salespeople who haven’t heard of Palo Alto’s Spoke or Mountain View’s LinkedIn.

“Now people can leverage even the most marginal social networks to get an introduction,” says Jack Herrick, a Bay Area entrepreneur who says it used to be nearly impossible to reach reclusive venture capitalists.

Users rave about the benefits of “leveraging” their friends. Dates referred by friends are easier to justify than the anonymous outings arranged by, say, Match.com. “I don’t feel the meat-market pressure,” said Berta Hyken, a San Francisco single.

Members can use their network to hire more trusted employees. Or they can get business deals done faster.

But there are also potential drawbacks: embarrassing situations when an unwanted ex shows up in your circle; concerns about spam and invasion of privacy; and pressure to stay popular by boosting the number of contacts in your network.

But none of those concerns appears to be hurting Friendster, which has seen 1.5 million registered users in five months of operation.

Entrepreneur Jonathan Abrams started Friendster after breaking up with his girlfriend in early 2002. Hanging out with other single friends, he realized that using sites like Match.com to find dates was no longer taboo. But it was hampered by the creepy factor, where “people pretend to be people they aren’t.”

So he started Friendster.com, as a way of connecting people with friends of friends, and friends of those friends — through three degrees of connectivity.

Abrams has so far relied on his own money and funding from individual investors, including Roger Lee, a venture capitalist with Battery Ventures.

Whether Friendster remains a hit, or fades, is a good question. And making money is another question. Much of the site will remain free, but Abrams wants to start charging users $10 or less when they contact people they don’t know. He hasn’t set a date.

Despite its popularity, Friendster is not perfect, as the experience of Dan Kuo, a San Francisco single, shows.

Kuo found Friendster a great way to link his friends on the East and West coasts. But then someone he didn’t like requested to be part of his network. “It was a funny and uncomfortable situation,” he said. “You have to either confirm or deny your status with them as a friend.”

After initial hesitation, Kuo let the person into his circle. The result, though, was that Kuo’s circle had been watered down, he said. “It is pretty much useless to me,” he said.

Warren Packard, a venture capitalist at Draper Fisher Jurvetson, has yet to invest in the sector, but he is impressed by the “exploding” popularity of Friendster. He agrees that the jury is out on whether Friendster can maintain long-term growth and make money, but he says there’s a market for good social networking ideas.

He’s considering an investment in LinkedIn, a start-up that promotes business networking, led by Reid Hoffman, former PayPal executive and also an investor in Friendster.

Hoffman co-founded SocialNet in 1997, a site that combined dating and networking. Hoffman sold SocialNet dating service company MatchNet in late 2000, for a small loss on the amount invested. Hoffman built LinkedIn after learning pitfalls to avoid, he said.

Professional networking services are difficult, he said, because they’re usually designed for people who want something and have little to offer. He now has a new strategy: Design it for the “haves, rather than the have-nots.”

LinkedIn allows individuals to invite contacts into their personal network, then allows them to search for people up to four degrees away.

One user was Ken Toren, a vice president of marketing at San Jose start-up REDmedic who was looking to hire a director of sales for the medical records company. Toren entered his profile on LinkedIn, added a few friends, and then plugged in “sales medical” in the LinkedIn search box. Up popped the name of Tina Mitiguy, who was linked to Toren through several degrees of connections: Mitiguy had worked in sales for Kaiser Permanente and was looking for work, so Toren hired her.

But to get to Mitiguy, Toren first had to send a request to his own contact, who then agreed to send it down the line, finally getting to Mitiguy through her friend Noah Mercer. Each step in the chain was blind, so that Toren wouldn’t know who rejected him had Mitiguy, Mercer or others in the chain believed the match wasn’t right.

Only direct contacts — one degree apart — can contact each other. That prevents spam and bolsters trust, explains Hoffman. LinkedIn was easy to use, Toren said, and the personal touch made him more comfortable about hiring Mitiguy.

LinkedIn is free for the moment, but it plans to start charging for completed connections, beginning at $10 or less. When asked whether he would pay that, Toren said: “You can’t beat it.”

Hoffman hopes LinkedIn will be the first online networking company to make money. He has invested $700,000 of his money and expects to announce a round of funding later this month or early next month. About 15 venture firms have expressed interest, he said.

Another company with buzz is Palo Alto’s Spoke Software. Spoke is led by Ben Smith, who worked as a senior adviser to the Secretary of Transportation, where he was one of the leaders in the department’s strategy to contain further attacks by Al-Qaeda.

So far, Spoke has reaped $9.2 million in venture capital from US Venture Partners, Sierra Ventures and Partech.

Spoke mines users’ Outlook e-mail flow to compile a list of contacts. Then, if it has access to the users’ contacts’ e-mail flow, it searches those too. It also trawls the Web and other sources of public data for connections. It also searches beyond four degrees of separation. Smith boasts that his software can help you find almost anyone: “You can give me your e-mail, and I can figure out who your mother is.”

Spoke also requires permission from contacts up the line before a connection is made.

Tom Chavez, chief executive of San Francisco start-up Rapt, used Spoke to close a bid deal with Dell. Rapt, which sells pricing and procurement software to companies, found out late about Dell’s contract tender. Using Spoke, Chavez managed to locate the right people at Dell. He reportedly beat out five competitors, including Selectica and i2.

Chavez calls it “leveraging relationships” and says it’s more necessary in today’s economic environment where there’s skepticism among buyers.

Ron Drapkin, of JRG software, said he doesn’t mind if he gets pinged by people looking for references. “So you get an extra e-mail now and then,” he says.

Ryze, another networking company started in San Francisco, allows anyone to directly request a contact with anyone else. Kris Duggan said he used Ryze to connect with a Webex saleswoman he hadn’t previously known, and he got a job there within two weeks. Previously, he had applied directly to Webex’s human resources department but hadn’t heard anything for months. “I’m a major believer,” he said.

Tribe Networks of San Francisco is the most recent company to emerge. Tribe.net is expected to launch its site Monday and, according to chief executive Mark Pincus, plans to combine the ideas behind Friendster and the online site craigslist — helping people find things like a job, an apartment, a dentist or a couch. Investors in Tribe so far include the Washington Post and Knight Ridder, parent company of the Mercury News. Pincus says at least four VCs have sought him out for a possible investment.

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