Starting a Business Is Impossible Without One Thing — and It's Not Cash The importance of social capital, especially for startups, is more than just a cliche.
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For countless entrepreneurs, the tried-and-true way of finding funders and staffing a startup is through cross-class connections — yet too few of them are properly focused on continually broadening their networks.
There are plenty of other important steps along the way to startup success: revenue growth, hiring the right talent, market knowledge, the list goes on. But there's one metric that deserves considerable attention in that process: broadening your answer to the age-old adage, "It's not always about what you know, but who you know."
The "who you know" often includes the support systems that come pre-embedded among those in wealthier economic classes. These successful entrepreneurs have navigators — successful relatives who can offer introductions, former professors or classmates who can review business proposals, etc. — that lower-income entrepreneurs without robust social networks typically lack.
It's probably true that entrepreneurs like Jeff Bezos or Elon Musk are so singular that they would have succeeded no matter how they started out. Yet entrepreneurs who don't come from privileged backgrounds can't retroactively go to a top-tier school or land an entry-level position at a promising company. They can't turn back time and ensure their social circles include people as successful as they hope to be one day. What they can do is focus on what's in front of them. Most importantly, they can intentionally build their social capital.
Thankfully, at the same time that there's an acknowledgment that many founders lack access to the right form of social capital, I've seen that more of those who possess it are finding ways to share it or provide it. One example is Vimenti's Project Makers, one of my company's projects, which seeks to develop entrepreneurial skills in young workers.
The benefits of programs like this and many others go far beyond sharpening a potential business idea. They speak to the heart of social capital, which is the development of trust between talented entrepreneurs who may be lacking in opportunities and established funders, mentors and collaborators who can help them try to get to where they want to go.
That trust is vital for entrepreneurs at all stages, but particularly early on. As most of them well know, they are seeking not just money, but direction — the kind of business-shaping advice they can only get from those who've done it themselves, and are therefore in a social strata they would not otherwise interact with.
Think about a community and a person who only knows the people in their immediate surroundings. If they are unable to incubate the trust piece — how to build trust and how to create environments where trust can be developed — they're never going to get to the part where that priceless asset becomes part of their social capital.
Many government programs have attempted to bridge the divide in cross-class connections. But as I see it, these initiatives only underscore the need for entrepreneurs themselves to take greater ownership of network-building solutions.
Consider the federal government's Recompete Pilot Program, for example, which offers up to $200 million to communities that have a prime age employment gap far behind the national average. It's a worthy program that my organization hopes to leverage, but it can't unilaterally remedy longstanding inequality gaps. An injection of financial capital is important, but it does little to solve the issues of those who really need social capital on its own.
Academic research on class connections suggests that, for every dollar in real capital brought into struggling communities, an equal amount needs to be invested in the form of social capital. This isn't theoretical; for instance, Jobs for the Future is a nonprofit that strives to transform the U.S. education and workforce systems and boost equitable economic advancement. But it's essentially a form of social capital: a program to increase the cross-class connections of prospective job hunters from low-income backgrounds that includes better schooling, coaching, mentorship and, most importantly, exposure to the sorts of already-accomplished people job hunters might never have had previously.
There is no quick fix to this issue. Class is the great divider across most countries, not just the most entrepreneurial ones like the United States. Tackling this issue can be a low-cost way to address a startup's ongoing hiring needs and help bolster economic opportunity and mobility. That's important on a broad scale because entrepreneurship is typically how economic mobility is created.
It's a statement I feel confident saying in part because, as an executive of an organization that supports a job accelerator, job training center, school programs and a health clinic in Puerto Rico, we're at work on similar attempts to increase social capital, too.
The gap between what those in wealthier communities take for granted and what those in low-income communities lack is starker in my work. I'm constantly confronted with the trauma, guilt and shame associated with poverty. I see how the barriers to mobility are as psychological as they are physical, and how the traps that keep poor people poor can only be overcome by exposure and connection to those who've never known those confines.
Especially for small businesses without a lot of resources, being able to join groups that are intentional about connecting to entrepreneurial mentorship can be formidable. It's not only about immediate feedback on marketing, sales or production. The hoped-for outcome is an entrepreneur who has expanded their capacity to do business because their network is growing and hopefully will continue to grow.
It's this last mile of entrepreneurial economic mobility that's most important to achieve and hardest to accomplish. That's what I know — and it's based on who I know, too.