Steps in the Rapid Startup Design Strategy to Create a Viable Company (655-2)

The Rapid Startup Design Strategy Overall : Go stepwise, don't dawdle, constantly always ask yourself, " Is this a dead end? &qu...

Tuesday, September 26, 2017

Building Social and Financial Capital (600-2)

I'm one of those older folks who is supposed to have used a face-to-face professional organizations to succeed. I am also about the most introverted person there is, so I chose fields that did not require me to handshake and hang out at parties. My funding sources were mainly through grant funds, and I represent myself and my ideas on paper. So I see the old school of building a social network as a straight jacket which provides funds to only those people with a particular personality style.

Dexter Robinson's blog post Building Social and Financial Capital persuasively argues that the world is changing and that a founder dedicated to the old school doesn't necessary have an advantage. And the founder better get on board with these changes if they hope to reach a younger audience. Moreover, the argument offers hope for younger individuals that they may indeed have found a way to level the playing field or perhaps tilt in their favor.

Social media, or more broadly media that enable long distance communication through platforms across a large breadth of users, upends the old school model.  I think it will completely replace it. I see social media and Internet-based social connections as a great for capitalism in that it provides a more efficient means of communication and for the best ideas to get support.

As an example in the past Angels were people you had to meet through accountants and lawyers and who were difficult to connect with. They, of course, came with biases and would only connect with certain people. Now they are more likely to be collected into online angel syndicates that will respond to online pitches. No handshakes. No introductions. And fewer biases. The only people who lose are people for whom the old system worked well for them. Folks high on the extroversion scale will continue to have an advantage, however the power won't be so absolute.

The challenge that I see with social media is that without focus it can become an enormous distraction. However, with focus, it can form the social capital necessary to launch a business. Dexters insight into how one could use social media to build a connection is a fantastic example. If you doubt the value of social media to make connections then perhaps you should ask him to perform a similar analysis of your situation.

Similarly, equity crowdfunding offers great potential for entrepreneurs to acquire the capital they need to launch their enterprise. As with the angel syndicates discussed above, collections of people whom one accesses via the Internet are likely to value ideas more based on their merit than on the presentation skills of the entrepreneur in a one-to-one framework. Those one-to-one skills will still be required. However, currently, those one-to-one presentation skills predominate in importance and a lack of those skills can cut off the entrepreneur from funding even when the idea has great potential.

I also see continued value in rewards crowdfunding as seen with Kickstarter and Indiegogo and many smaller examples. There won't be enormous wealth to be obtained however there is enough capital and input and guidance for the entrepreneur to establish an idea, test the waters, and build a customer-focused enterprise from the beginning. In essence, reward crowdfunding has all one needs to get the ball rolling.


Wasserman Noam. The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup. Princeton University Press. March 25, 2012, p. 47.

Photo Credit Pixabay. CC0 Creative Commons. Free for commercial use. No attribution required


  1. I'm extremely extroverted and I still find the handshake model espoused by modern business intimidating. I'm older too, so trying to remember who all of these people are can be such a challenge!

    But I have been working the social media for some time. Most of my contacts I made when I owned a music venue in Asheville, but I'm finding this list very useful in my current endeavors. It's just a matter of spending the time. You can do this.

    1. Arjay,

      Yes, I've found that keeping track of names and contacts is a learned skill. There are definitely tricks. The first one I learned was to start off all conversations with the person's name and include your name at the bottom :) I'm still learning, I forgot to do that the last time!

      -- Brad

  2. I think more large scale companies may continue to run off of grants. The only thing that I have found when writing grants it that they are not the only source that you can rely on unless you have a good track record with them to begin with. Another thing I have learned about grants is that they are slow to process and if you are waiting for a grant to start your business you might as well plan it out for a couple of years. Then you have the additional reporting for grants that are required. If the company does not report or missuses the funds then that money has to be paid back to the granting agency.

    1. The challenge with grants is they are a different game to play. And its hard enough to learn how to play the Angel funding game (or Kickstarter or ...). Your other point is good one. People who give you money want something in return. If not money, they want some kind of report that shows you did some useful with their money. Walking away from a grant and saying "sorry it didn't work out" or "the market changed" isn't really an option.

  3. Great post Brad! As you know, I agree with you that social media, used appropriately, can positively contribute to one's social capital. I love social media simply because, in many cases, it takes away the middle man. One can talk directly to the source. Not that I'm in support of it, but any of us could directly tweet the President of the United States right now, and he could reply directly to us. Name another time in history when people have had that sort of direct access to high profile people. What's even more amazing is that the opportunities to interact with high profile people are endless, and not just a one time occurrence on social media. I do see the value of professional networks, but I think social media is forcing their hand to be more engaging.

    1. Yes, I've been reading up on "customer experience" and there is great optimism that these kind of changes and the focus on customer experience will revolutionize political systems and capitalism. Today's monopolys will struggle against customers who demand more and more. And with time that will require companies that cooperate to address a broad definition of customer experience that extends beyond their limited ecosystem/platform (e.g., Apple/Facebook/Microsoft)