Importance of Social Capital

Hugh Mason, co-founder of Singapore based startup accelerator JFDI.Asia, recently posted a wrap-up article of the accelerator’s 100 days bootcamp program. In the article he concluded his experience going through the first batch as the following, which I particularly wanted to quote.

Meng and I talk often about building the social capital - relationships, shared insights and know-how – that will create a vibrant, sustainable start-up ecosystem here in Asia. That’s our ambition. We will have succeeded when some of our start-ups founders become funders for the next generation. We hope that will happen in the next 3-5 years.

One thing I’m beginning to see often in these years is tendency many aspiring entrepreneurs, especially tech oriented folks in younger generation, seem to underestimate importance of social capital. They think shipping MVP and getting feedback from users is the fastest way to get funded and gain tractions.

In rare cases that kind of thinking works, but in reality it does not. Getting funded is not something you can achieve by making 1000+ online friends and poking them though Facebook, LinkedIn, and AngelList. Likewise, gaining traction does not equal to sending random press release and being featured on TechCrunch either.

First step of fund raising always starts with reaching out to prospective investors who share same vision followed by understanding personality of each investor as human being. From investor’s perspective this step is exactly the same. They do not make investment in your startup unless they fully understand your background, personality, and most importantly long term vision. This exact process is called building the social capital a.k.a. getting to know each other ‘offline.’

My most recent startup Coworkify was born out of my own necessity and I’m certain large portion of future workforce will become independent workers or fulltime employees working outside office environment. However, at the same I understand this is not type of investment opportunity every investor finds it interesting. Hence, building the social capital in my case requires lots of efforts, but definitely it’s worth doing it and I enjoy doing it a lot.

Startup is choice of lifestyle, certainly not way to make money. I don’t blame on people creating whatever version of Instagram, Pinterest or Etsy in niche segment. Chances are you won’t succeed by doing so. But even if you do succeed, make sure you have built both monetary capital as well as social capital along the course of your startup life because the former is temporary asset but the latter is life-long asset.

I suggested that you start building your own social capital if you haven’t done so. Do it globally so that your asset will become international by default. Tweeting and blogging in English might be a good starting point.