What Is Social Capital and Why Is It Important?

Some founders seem to have an unfair advantage.

They know the right investors before they start fundraising. They can call experienced operators for advice. They attract exceptional talent long before they can offer market-rate salaries.

These advantages are not a coincidence. They are the result of something economists and sociologists call social capital.

If you are wondering what "capital" stands for in "social capital", marketing strategist Porter Gale captured the idea well:

"Your network is your net worth."

While this definition is somewhat simplistic, it gets to the heart of the concept. Social capital is often discussed in terms of networks, status, or a combination of both.

And if you've clicked on this article, chances are you're interested in learning how to build social capital as effectively as possible. Before we get into that, however, we first need to understand what social capital actually is.

Understanding Social Capital

Social capital is the sum of the network, trust, reputation, and access you can mobilise through your relationships. In practical terms, it depends both on the size of your network and on the financial power, expertise, influence, and connections of the people within it.

According to sociologist Pierre Bourdieu, social capital is the size of the network of connections you can effectively mobilise, which also depends on the volume of the capital (economic, cultural or social) possessed by those contacts.

In other words, you shouldn’t network with just anyone if you want to do so effectively. Instead, effective networking requires being selective about the people you engage with, while still building a broad enough network to develop a strong base of contacts.

The question, then, is how do you build it?

7 Tips for Effective Networking

Networking needs to be balanced between quantity and quality. The following practical tips will help you network more effectively:

1. Never Eat Alone

In his book, Never Eat Alone, Keith Ferrazzi postulates that you should always have at least one conversational partner for lunch and dinner. If you manage to meet, on average, 2 new people per day with this strategy (and if you use it both during working days and during the weekend), you’ll have met over 700 people over the course of one year.

After 20 years, this means you would have met over 14,000 contacts and likely built one of the strongest networks among all your friends.  Having used this strategy myself, even though not to such an extreme extent, I was positively stunned by the results. 

2. Attend Networking Events

There are multiple types of networking events that you as an (aspiring) entrepreneur can attend, such as pitch competitions, ‘fuck up nights’, panel discussions, startup festivals and summits.

If you can secure stage time at these events, I recommend doing so. Speaking on stage significantly increases the number of people who approach you afterwards.

However, even if you are not a speaker, attending can still be highly valuable. If your mission is clear, approach people directly and discuss your goals and challenges. If you are still exploring different directions, focus on having a few long and meaningful conversations rather than dozens of short and superficial ones.

3. Engage on Social Media

The essence of building a strong network and gaining social capital is to connect to a diverse group of people, which is why using social sites, such as Twitter, can help you get more investments and better ideas.

Research showed that employees who use Twitter have better ideas than those who do not. Moreover, engagement on Twitter especially if it leads to getting mentioned by other startups significantly correlates with funding success.

Depending on your status and personal brand, people you connect with over social media are very open and quick in responding and can enrich your network.

4. Join Networks and Communities

The 21^st century is the age of networking and community. With physical borders increasingly losing their relevance, virtual places such as Slack and Discord communities become the go-to-place for people with similar goals and interests to connect.

For example, there are entrepreneurship networks such as Sigma Squared Society, EWOR, Y-Combinator, Founder’s Forum, and Entrepreneurs’ Organization with which you can connect to people and build up your social capital.

Those networks usually focus on providing access to investors, advisors, customers, and other entrepreneurs at the same time. Often, a weekly or monthly meeting cadence is required by those networks which are very helpful to build up a strong network.

5. Become a Content Creator

If you want to go the extra mile in the networking game, you can start a blog or a YouTube channel or be active on LinkedIn and other social sites to engage with your followers and invite them to be part of your community.

This strategy is one of the most effective ones mentioned so far. As, by stating your goals clearly in the content you create, you automatically filter for people who are interested in your community content.

6. Re-connect With People You Haven't Spoken In a While

Most people who are active networkers are under the assumption of constantly having to re-engage with the people they already know. This is simply not true.

Re-engaging with weak ties, such as people you haven’t spoken with in a long time can be more valuable. First off it makes your connections happier if you reach out to them after a long time and second people you did not connect with for a long time, are more likely to provide you with a valuable opportunity.

The latter might sound a bit counterintuitive, but itmakes total sense: You speak to your friends all the time and you and your friends are all connected to each other. Therefore, you already know what’s going on in your close network.

However, when speaking to people you haven’t spoken to in a while, they will likely have access to other people you haven’t spoken to in a while. This can lead to more interesting opportunities. 

7. Bridge Social Holes

If you as an entrepreneur manage to become the connector between networks, you will quickly be regarded as one of the key connectors in your industry. 

This introduces a third dimension to networking: it doesn’t only matter with how many people you connect with and how powerful those people are but also what the structure of the networks of those people is that you are connected with.

The less they are connected with each other, the stronger your position in your network will be.

A Final Note

Building up social capital can be one of the greatest determinants of your success.

The principles outlined in this article can help you build stronger relationships, access better opportunities, and accelerate your venture's growth. Keep in mind that both the quality and quantity of your network matter.

If you liked this content make sure to connect to Daniel Dippold on LinkedIn!

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