Social and Financial Capital – Helping Entrepreneurs Swim

When I think about starting a new venture I am reminded of learning to swim.  Some people take the plunge, willingly or unwillingly, into deep water to force the survival instincts to enable some life-saving technique.  Other people prepare with flotation devices that will ensure some perceived guarantee of staying above the waterline. There are those that rely on coaches and learn by working with others in a similar position that may have different skills.  If I compare these swimming situations to entrepreneurship, there are some similarities that help me understand value.

Social capital is very much like the swimmer having coaches and others around them with varying skills proving feedback and guidance.  Social capital for entrepreneurs cannot be undervalued as it helps on many fronts.  The network of resources within social capital may lend assistance with finding financial support or guidance.  This network may also help with identifying candidates to partner or work for the venture.  Social capital is not just a list of connected people, it is a toolbox of human resources that can provide valuable advice, connections and credibility.

A younger entrepreneur will likely be more challenged with social capital as they have not yet had the opportunity to build a significant network (Wasserman, 2012). However, the growth of social media and digital professional networks has allowed for faster, more accessible ways to connect and build social capital. These resources allow for identification and review of potential valued connections.  One drawback to these new opportunities to connect is ensuring personal and professional are managed appropriately.

Financial capital is another challenge.  I view financial capital as the swimmer with flotation and other supportive devices.  These support devices must be acquired and do not guarantee success.  There is also the question of when a person is comfortable enough to remove them.  When an entrepreneur is considering starting a venture, their financial situation may drive their decision.  Having a job pays a steady salary, but can limit comfort in losing the steady stream of income.  Losing a job may push a person to start a venture and provide benefits such as severance to provide funding.  An employed spouse may also provide the financial support needed to allow limited income from a new venture.

Both social and financial capital are important for entrepreneurs beginning their new venture.  Financial capital is required for any venture and can be seen as most important.  However, social capital provides greater importance by what it can bring to a new venture.  “You see, when you’ve developed a wealth of social capital, you can obtain any other resources you need..” (Cancialosi, 2014).  Using social capital an entrepreneur can leverage people with different experiences and skills to help them.  Like the swimmer with the coaches and others providing advice and support, social capital provides a network of assistance.  Without social capital, an entrepreneur might is jumping into the deep water alone.

 

References

Cancialosi, C. (2014, September 22), 4 Reasons Social Capital Trumps All, https://www.forbes.com/sites/chriscancialosi/2014/09/22/4-reasons-social-capital-trumps-all

Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton, New Jersey. Princeton University Press.

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