The Importance of Social & Financial Capital
Social Capital Defined
Noam Wasserman’s, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup, is a great resource for entrepreneurs. Wasserman (2012) defines social capital as “…the durable network of social and professional relationships through which founders can identify and access resources” (Wasserman, 2012, p. 47). Perhaps being able to access resources is one of the most important components of beginning a new business. After all, resources are needed to create. Whether or not we realize it, we spend our lives building social and professional relationships. We are not living on an island alone. And even if we were, we would still need resources to survive. We would begin searching the island for them! A list would be made and we would begin searching until we marked off the items on the list. We know we cannot live without certain resources and we would either find those resources or die trying. Our lives would depend on it.
Businesses also rely on resources. Social capital is one of them. Focusing on social capital has many important outcomes including the ability to be competitive, to improve business performance, to improve growth, to improve satisfaction with suppliers and employees, and to have a larger reach with consumers (https://balancedachievement.com/areas-of-life/social-capital/). Point blank, paying attention to and building social capital is important especially for new entrepreneurs.
Financial Capital Defined
Social capital is not the only item that should be on our lists. We all know that financial capital is also needed. Financial capital is defined as “…economic resources used by businesses and entrepreneurs to start.” (Building Your Social Capital, 2017, p. 1) The importance of financial capital is easily understood. After all, everyone understands that in order to have a business, one must have the financial capital to start one. Again, the search for resources becomes important.
A Link Between Social and Financial Capital
There is a link between social capital and financial capital. Wasserman (2012) expresses studies have shown that entrepreneurs that have more social capital in the beginning often are able to gain the financial capital they need at a faster pace than those that do not. New entrepreneurs should not neglect the building of social capital, but should realize the importance. Some ways to build social capital include networking and making a point to meet diverse people (https://balancedachievement.com/areas-of-life/social-capital/). Building relationships should be an important priority.
Considering watching the following videos:
The first video highlights the importance of social capital in the lives of everyone. According to the video, those with disabilities were shown to have only 25 social contacts in their lives compared to the average person who has at least 150 connections. From personal experience, I know that the disabled struggle to live full lives; they rely on others to help them and if they do not have others…what is their life like? There are those that are left behind because they do not have the social capital they need. With social capital, life is so much fuller. Now consider how your business is affected by social capital and how much it will struggle without it. It’s worth the time to build social capital. Your business may depend on it.
Social capital and the power of relationships: Al Condeluci at TEDxGrandviewAve
The second video provides four ideas for building more social capital for your business.
4 Steps to Building Social Capital with Dr. Ivan Misnera
Building Your Social Capital. (2017, January 13). Retrieved September 03, 2018, from https://balancedachievement.com/areas-of-life/social-capital/
Condeluci, A. (2014, June 03). TEDxTalks Social capital and the power of relationships: Al Condeluci at TEDxGrandviewAve. Retrieved September 06, 2018, from https://www.youtube.com/watch?v=qaBUV2J0ax4
Misner, I. (2011, November 23). 4 Steps to Building Social Capital with Dr. Ivan Misner®. Retrieved September 06, 2018, from https://www.youtube.com/watch?v=9qSwD7RAw1g
Wasserman, N. (2012). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton, NJ: Princeton University Press.