Everyone in the entrepreneurial community has watched Silicon Valley’s success over the past years. I’ve been particularly surprised by the emergence there of an asset that has sped organizational growth and eliminated some serious hurdles for entrepreneurs. Nope, it’s not financial; it’s Social Capital.
While there’s no shortage of academic writing about it, even Wikipedia’s description is cumbersome: “Social capital is the expected collective or economic benefits derived from the preferential treatment and cooperation between individuals and groups.”
Here’s my take: Social Capital is the willingness of people to help those that they know or know of.
Stories abound about Silicon Valley cocktail parties where millions of dollars have been raised for a start-up or a chance meeting at a Palo Alto coffee shop that resulted in the perfect match between the Hustler, Hipster and Hacker.
Established VC’s are pretty clear about their reliance on Social Capital. Sean Jacobsohn of Emergence Capital wrote in Venture Beat, “Personally, the primary reason I don’t meet in person with in-bound requests is that the entrepreneur was not vetted by someone I trust.”
Out here, in rural and small town America, we are rich in Social Capital. We know each other, or at least know enough of our friends and neighbors that our networks are often more robust than those of our neighbors in larger urban centers. And, while our cocktail parties might not net millions, they often produce the kinds of contacts that can produce serious returns for our entrepreneurs and growing businesses.
When I was building a tech company in Northwest Montana, we were helped by so many amazing people right in our backyard. These kind folks gave us entrée to investors all over the country, high level executives from ESPN to Oracle, and potential customers that were willing to back us with prepayments and priceless business insight. In other words, we survived our early days by vigorously seeking and deploying our Social Capital. And, because we did so successfully, we were able to build a great business on a few million dollars while our competitors (from much larger cities) spent hundreds of millions yet never managed to catch up with us.
Today, I’m part of an angel capital fund based in Montana. In addition to investing, we often wind up coaching and sharing contacts, and not just for our portfolio companies. We’re not a huge angel fund in terms of funding, but we have a lot of Social Capital and don’t hesitate to use it. The role of money in supporting start-ups is pretty clear, but plenty of failed start-ups have had access to lots of dough. Obviously there’s more to the equation than just money.
So, if you’re an entrepreneur in rural America, pay attention to Social Capital. It’s been working in Silicon Valley. You can make it work for you too.
Learn more about Diane by following her column here or visit American Rural at AmericanRural.org.