FOR ENTREPRENEURS AND INVESTORS
Social Capital vs. Human Capital
What's the difference, and why are they important?
People are the brain of the startup. They are the lungs. And they are the legs. Without people, it is impossible for a startup to generate the vision, design the product, and build a loyal customer base. But people differ in their capacity to contribute to a startup's mission.
Therefore, you need the right people to increase your human and social capital. This blog explains the difference between human capital and social capital and why they are critical for startup success and survival.
What is Human Capital?
Human capital refers to the knowledge, skills, abilities, and other characteristics (KSAOs) that employees possess that are valuable to organizations. A KSAO is valuable if it can enhance performance. For example, if you're the founder of an EdTech startup focused on higher ed, then a KSAO that would be valuable would be knowledge of the education industry. Knowledge of the education industry would not, however, be valuable for an AgTech startup.
Human capital is an essential component of a startup's success because it:
- Increases Innovation: You can confidently rely on the creativity of their employees to develop new products.
- Allows Flexibility: You can create an agile structure by ensuring your employees have adaptability skills.
- Accelerates Growth: Your startup can achieve its goals through enhanced productivity and efficiency enabled by the right KSAOs.
- Gain Competitive Advantage: By hiring and investing in high-performing employees, your startup can build a more talented workforce than your competitors.
- Increases Social Capital: Talented people tend to have more robust networks in their respective industries.
What is Social Capital?
Social capital refers to the valuable resources available to individuals and groups through social networks and relationships. These resources can include information, knowledge, support, and even financial capital. There are several different types, including bonding (i.e., connections with similarities), bridging (i.e., connections with complementary skill sets), and linking social capital (i.e., connections with people in positions of power or influence).
Social capital is an essential component of a startup's success because strong connections will help you:
- Access Funding: You will have a better chance of securing funding from investors if you have mutual connections that will offer introductions.
- Generate Leads: With the right connections, you can build relationships that lead to new customers, partnerships, and collaborations.
- Acquire Human Capital: You can attract and hire top talent by creating awareness of job openings and garnering referrals.
- Gain Knowledge: You can access experts with knowledge that helps you navigate challenges and make better decisions.
Conclusion
In conclusion, prioritizing human capital can help you innovate, be flexible, achieve growth, and gain a competitive advantage. A talented and motivated workforce is critical to the success of your startup. Social capital is vital for your startup because it can provide access to funding, business development opportunities, talent acquisition, and knowledge sharing. You can increase their chances of success and survival by building strong relationships and networks.
Need Advice or Have Questions?
Blackhawke partners with the Endurance Group to help those in the entrepreneurial ecosystem leverage human and social capital for growth and success using various data-based methods. Schedule a free 15-minute consultation with an I-O psychologist or a free demo of the Commonality tool. We'd happily provide advice or answer questions, no strings attached!
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