You can be on Entrepreneur’s cover!

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.

By Eduardo Carrera

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

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.

Related: When 'Who You Know' Can Actually Hurt Your Entrepreneurial Success. Here's Why.

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.

Related: How Cultivating Relationships Helps You (and Your Company) Thrive

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.

Eduardo Carrera

Entrepreneur Leadership Network® Contributor

CEO

Eduardo Carrera is CEO of the Platform for Social Impact, which directs capital toward solving systemic challenges for economic mobility for families in Puerto Rico.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Resumes & Interviewing

Build a Better Resume with This $35 Subscription

AI Resume Builder promises to help you apply to jobs twice as fast.

Side Hustle

He Took His Side Hustle Full-Time After Being Laid Off From Meta in 2023 — Now He Earns About $200,000 a Year: 'Sweet, Sweet Irony'

When Scott Goodfriend moved from Los Angeles to New York City, he became "obsessed" with the city's culinary offerings — and saw a business opportunity.

Marketing

I Got Over 225,000 Views in Just 3 Months With Short-Form Video — Here's Why It's the New Era of Marketing

Thanks to our new short-form video content strategy, we've amassed over 225,000 video views in just three months. Learn how to increase brand awareness through short-form video content.

Business News

Samsung Makes 6 Day Workweeks Mandatory for Executives as the Company Enters 'Emergency Mode'

Samsung said its performance "fell short of expectations" last year. Now executives are required to work weekends.

Productivity

6 Habits That Help Successful People Maximize Their Time

There aren't enough hours in the day, but these tips will make them feel slightly more productive.

Leadership

You Won't Have a Strong Leadership Presence Until You Master These 5 Attributes

If you are a poor leader internally, you will be a poor leader externally.