In an earlier blog, our resident Angry Ninja stated how difficult it can be to get a loan from a bank (sign off on your first born), or receive investment from a venture capitalist (give them 80% stake of your company). Sure he was being sarcastic, but these examples demonstrate just how risky these traditional methods of financing can sometimes be, especially for the less established business owner who simply cannot afford to take on such big risks.
But money should not have to get in the way of making someone’s passion a reality. And in this era of social media and group buy websites, it doesn’t have to. Why? Because we can harness the power of something called “social capital”. Before we dive further into the definition of social capital, let’s go back to the topic of traditional sources of financing for a second. Relatively speaking, with the traditional methods there are just a few sources of capital, but plenty of small businesses that require funding. The odds of getting financing can sure look slim sometimes, especially when everyone’s knocking on the same door to get it! But what if the tables can be turned? What if (again, relatively speaking) there were a few small businesses looking for a loan, but plenty of potential financers available? All of a sudden there are thousands of potential doors to knock on!
You probably have a good idea by now, but we’ll pose the question anyways…..what exactly is social capital? Social capital is the value that exists through your personal network. Value can be obtained through the people you know, and the people they know and so on. If a project owner can earn the support of, say, a few hundred people who each provide a small sponsorship amount, collectively they have the potential to raise as much funds as a business loan from a single bank! This is an example of a benefit from social capital, and it’s one of the major factors that can make a Springboard project succesful.