Band De Fruit
Your intent is to be an entrepreneur. You have been working for others, planning what it will take to be on your own, and dreaming of the day when you are the boss. For many years you have been working hard to get your human capital ready; gaining the knowledge, skills, experience and competencies to bring this idea to fruition. The desire to bring your idea to market burns within you. The passion is there, but the question is are you ready with other types of capital? In addition to human capital, social capital and financial capital are two extremely yet different types of capital that the entrepreneur needs on his or her journey towards success.
In Noam Wasserman’s, The Founder’s Dilemma, he defines social capital as the durable network of social and professional relationships through which founders can identify and access resources. (Wasserman) Another easy way to look at social capital is the adage from Jesse Colombo of Forbes, “it’s not what you know, it’s who you know and who knows you.” (Colombo) Not only is your social capital important, but so too is the social capital of the people in your networks.
Social capital is not something that is developed overnight. Not to sound flippant, but it is all about the network. What is your network? Networks are all around and entrepreneurs will benefit from creating a large and expansive network. The social capital developed from these networks will be an important part of helping to get one’s idea off the ground. A person may think he or she does not have much of a network when in fact that view is limited by not thinking about the many ways he or she are connected to others.
Read this list and see how many people you know who might fall into one of these categories: school connections, work contacts, family contacts, current or past customers, current or past employers or employees, members of any organization where you volunteer or are part of, friends, potential investors, and advisors. Now you should see that your network may be bigger than you thought, but does that mean you have social capital? Not necessarily, according to Ellen Ostrow, of Lawyers Life Coach LLC; she believes that social capital is not personal resources as they cannot be owned, but rather they exist as authentic relationships with other people. (Ostrow) She believes that true authenticity comes from helping others with kindness and generosity when they are in need. Now when you look over those networks, look at them in terms of the relationships with people and think about whether they are genuine or superficial. It is those genuine and authentic relationships that are considered social capital and will lead people to help you with your idea.
Unfortunately, social capital will not buy the inventory or pay the salaries, taxes, fees and the host of other monies needed for a start-up. That is where financial capital comes in. I hear the groans already when it comes to finding the financial capital. Another study by Wasserman states that 51.3% of the people who had considered becoming entrepreneurs could not because of the lack of financial capital. (Wasserman)
There are another 48.7% of the people that started a business and found the financial capital. Financial capital is going to be different for everyone and it is not easy to get, especially for a start-up. Perhaps all the years you were working on your human capital you have been saving monies and are able to take your financial capital, leave your job and start right in. There are numerous people who have started their businesses in the garage while living with parents and families. When there was more financial capital they were able to leave the garage and go to a commercial building. Sometimes it may require angel investment groups or pitching competitions. Do not be discouraged. Because you have another account and that is your social capital account. It is those contacts that will be beneficial in helping to gain more financial capital. Ivan Misner, the founder of BNI, a business networking organization, “believes that if you invest as much care in raising and investing in your social capital as you do your financial capital, you will find the benefits that come from that investment will multiply your returns many times over.” (Misner)
So stop reading and start mapping out your social capital. It might lead you to the financial capital you are seeking.
Resources and Links:
Wasserman, Noam The Founder’s Dilemmas. New Jersey: Princeton UP, 2012.
“4 Steps to Building Social Capital.” Entrepreneur.com. 2011
Web. 5 May. 2015
“It’s Never Been Easier to Build this Little Known Type of Wealth.” Forbes.com. 2014
Web. 16 May. 2014
“The One Activity You Can’t Afford to Pass Up: Building Social Capital.” Lawyerslifecoach.com 2009
Web. April. 2009