Startup MGZN

3 Types of Capital Every Entrepreneur Needs

Once you hit the start button on implementing an idea, and you are in the process of actively turning it into a business venture; it’s not too hard to notice that everything about the world of entrepreneurship revolves around “money”. Entrepreneurs are constantly raising and spending money in order to make more money which makes sense because that’s what starting a business is all about, right?!

Venture capital firms, angel investors, incubator/accelerator programs, business competitions, academic entrepreneurship programs, it just seems that everyone is offering fat cheques and lucrative cash awards to the most promising ideas and business models these days. While “money” is one of the most crucial types of capital for building and managing a business, it certainly isn’t the only one that entrepreneurs need to increase their chances of making it to the other side.

  1. Economic Capital – This type of capital can be easily defined as anything that goes into the production of your product or service such as money, office space, a factory, land or a piece of property, patents or intellectual property rights, machines or a state of the art technology and other digital assets.
    Thus, you will notice that entrepreneurs usually decide to reach out to investors to raise money that will eventually be injected into building a specific type of technology, a product prototype, a machine, filing for a patent, buying land or getting office space. Of course, it depends on your idea and business model but, most entrepreneurs seek out this type of capital in order to start and need the other two types to continue.
  2. Social Capital – Social Capital is defined as the actual and potential resources connected to a network of mutually beneficial relationships or in other words “it’s not what you know, it’s who you know”. To entrepreneurs, social capital represents the personal and professional network of supporters which includes family and friends, team members, fellow CEO friends, corporate managers, journalists and media figures, investors and VC’s, high profile executives and other significant ecosystem players. Each and every one of these individuals play a key role in the success of business projects.
  3. Culture Capital – This term was coined by French Sociologist Pierre Bourdieu in 1977 to describe a type of capital that consists of education, style of speech, character, a way of thinking, learned languages, work of art or scientific discoveries, academic credentials or professional qualifications that a person has. This type of capital cannot be transferred but, it can be acquired over time. You know why you need this type of capital as an entrepreneur? Because it is the only factor that can guarantee the success and sustainability of innovation in your venture and you can acquire it through reading, exposure to different experiences, people and cultures.

The bottom line is that entrepreneurship is not reaching the target of your first, second or 100 million dollars, it’s a journey that comes with many chapters. Each chapter with its unique set of challenges and opportunities will certainly leave you an entirely different person with new perspectives, new convictions and new ways of doing things. Thus, yes, money is extremely important but, in order to use it right, you need to put the necessary time and effort into who you know and who you are.

Sarah Kurdi