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.

Reference:

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

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