If startups were a country, the capital of them would be Social and Financial, because business puns are great! But seriously, without these two things, a startup never has a chance. In reading this section of The Founder’s Dilemma, they do a great job of laying out how important social and financial capital really are.
Personally, and the book touches on this, believe that social capital is the greatest. It is where connections are made to actually create the financial capital that you need. The Founders Dilemma made this clear, however I would like to use an analogy to explain why this is.
When you are thinking about going out to eat for a special dinner. Sometimes you look up online a place to go and it works out but it is a bit of a risk. Then other times you ask a friend or you tell a friend you are going to a certain area and they suggest a place. If you trust that person you attend that restaurant, and typically it works out. I believe that this is a great example of social capital that leads to financial capital. Allow me to explain.
The person seeking the restaurant is the financial capital, the restaurant is the entrepreneur, and the friend is the social capital. Entrepreneurs make friends all the time and have to actually cultivate a relationship of trust and satisfaction in the relationship. Now that the person feels satisfied in the relationship they are willing to introduce others to the entrepreneur, or the restaurant, for the entrepreneur to build a relationship with and seek financial capital from because the financial capital, or the hungry person, is looking for trust in a project and wants to both help someone and be utilize their money.
This is not a perfect analogy but I hope it emphasizes my point some what. I believe social capital is of the utmost importance and spend a lot of my time cultivating good relationships. But I want to make it very clear. I hate fake receiving relationships. I do not purse those. I believe in true genuine relationships where actual trust is built. Ones where I actually know about their family, their work life, their social life and they know a lot about me.
If you are in to social capital just to get something from them, then I encourage you to change course because no one likes that person. Sure you can make connections with powerful people and possibly achieve success, but if you did not enjoy time with the people on the way, is it really worth it. Is it worth taking from others who you share nothing with and know nothing about? I would say it is not. Interactions with people is one of my favorite things, and if I never accomplished anything but had a bunch of good relationships I would be happy.
However, I also believe that growing in relationships is also working together and taking risks on one another. It helps you to build on what you already have. Otherwise those relationships get stagnant and honestly you enhance their lives in no way. My wife and I live to enhance the lives others. In our business, in our investments, and in our every day relationships.
So I would say that you should go out and build social capital, but true rich social capital and then work with those people to create magnificent things! You will enjoy the success yourself, but you will enjoy it even more with those people!