Working in finance, when I hear the word capital my mind immediately goes to money. Cash, debt, equity, funding, etc. The discussion of social capital in The Founder’s Dilemmas made me think about capital a little differently. A founder can have a great idea and some money behind it and still be missing a lot of what is needed to actually build a company.
Who do you call when you need legal advice? How do you find your first really good employee? Who can introduce you to a potential investor or customer? Who has already made the mistake you are about to make and can tell you not to do it? Those relationships have value even though they never show up on a balance sheet.
I have probably seen this more clearly in my professional career than I would have a few years ago. Networking used to feel somewhat forced to me. I thought about it mostly as something people did when they were looking for jobs. Over time, I have realized that some of the most useful professional relationships are the ones where neither person needs anything immediately. Someone you worked with three years ago might eventually know the right person for an opportunity. A former manager can give you perspective on a career decision. Someone with a completely different background can answer a question that would take you hours to research yourself.
For Mindful Money, I could see social capital becoming extremely important. I know finance, budgeting, forecasting, and business analysis pretty well. I do not know everything about building technology, digital marketing, legal compliance, or operating a financial education company. I would either have to learn all of those things myself, pay someone every time I had a question, or have people in my network who could help me find the right answers and people. I think social capital and financial capital feed each other. Investors are probably more comfortable with a founder who can attract good people. Good employees may be more willing to join when they trust someone already involved. Customers and partnerships can come from introductions.
The biggest thing I took away from this is that you cannot really build a strong network at the exact moment you need one. By then, you are already late. Relationships need to exist before there is an immediate ask attached to them.
Reference
Wasserman, N. (2013). The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton University Press.