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        • Resources | Tips | Case Examples

Building Social and Financial Capital

May 24, 2019 | Brad Tanner

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 method of face-to-face communication doesn’t necessary have an advantage. The founder better get on board with the changing nature of engagement 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 enables long-distance communication through platforms across a large breadth of users, upends the old-school model. It will likely replace it completely. Social media and internet-based social connections are great for capitalism in that they provide a more efficient means of communication and for the best ideas to get support.

As an example, in the past, angel investors 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. Fewer biases. The only people who lose are people for whom the old system worked well. Folks high on the extroversion scale will continue to have an advantage; however, the power won’t be so absolute.

The challenge 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. Robinson’s 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-on-one framework. Those one-on-one skills will still be required. However, currently, those one-on-one presentation skills are predominate in importance, and a lack of those skills can cut off the entrepreneur from funding even when the idea has great potential.

There is continued value in reward crowdfunding as seen with Kickstarter, Indiegogo, and many smaller examples. There won’t be enormous wealth to be obtained. However, there is enough capital, 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 someone needs to get the ball rolling.

Further Reading

  • 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.

Category: Business Tagged: engagement funding

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