The underrated types of capital that no one is talking about
There is so much chatter about Venture Capital all around the Internet but founders, makers, and builders need other things before VC
What are these underrated kinds of capital?
I call them Belief Capital and Social Capital. They are different than the traditional Venture Capital and have nothing to do with doling out cash.
Why do they matter?
Because these kinds of capital are what’s missing from the ecosystems that are trying to replicate the magic of Silicon Valley.
The common misconception is that pumping out money is all that matters to be a fertile land for billion dollar startups. It couldn’t be farther from the truth.
My obviously biased take is that what’s missing is the two types of capital I discuss below. If you intend to support new entrepreneurs and create breeding grounds for ambitious projects, you’ll want to learn about what’s beyond Venture Capital.
Who are you?
I’m a co-founder at a new social platform called Cuppa. I host monthly meetups for founders, weekly mastermind sessions for makers, and built community products in the past. I interact with about 100-120 founders a week.
But first, what is Venture Capital?
Venture Capital is defined as monetary capital invested in a project in which there is a substantial element of risk, typically a new or expanding business. They are so many variations of VC but the core thesis is purchasing equity of a new idea/startup/company by investing money.
What is Belief Capital?
Belief capital is the first and foremost investment that goes into an idea. This is an intangible investment. As a founder, you have to be the no#1 believer of your idea but this is not always easy since your mind can talk you out of your best ideas simply because it can over analyze the downside. The people around you who can talk you into pursuing your ideas are belief capitalists. They see the potential upside, ways in which your idea can be developed, and most importantly your personal worthiness in all this. They believe in you first and hence in the idea you have chosen to pursue.
It’s very rare to find belief capitalists because they have to share these 4 traits:
1) root for your success without feeling insecure
2) see the vision of your idea along with you when it’s just an inkling/hunch
3) put aside ego/wanting credit for your win
4) be totally ok and non-judgemental if your idea bombs upon launch
The fascinating thing is anyone can be a belief capitalist if they decide to. It won’t cost you anything except perhaps a few minutes of your time and attention. But at the receiving end, for a founder, this can be life-changing.
Recently, I had experienced this first hand a couple of times.
The power of Belief Capital.
I was talking to a friend about how our current products almost didn’t see the light of day. It made us wonder how many thousands (if not millions) of ideas died because the founder was discouraged early.
The friend I’m referring to is Dru who you may know from Twitter as @drurly. Dru is a prolific researcher, writer and maker. His latest idea is Trends.vc where he helps you discover new markets and ideas weekly by distilling 30 hour of research into 5-minute reports. Today, he enjoys loyal (and loud) support on Twitter for Trends and even started making money on his reports. It may seem obvious that Trends was meant to be a blockbuster project but not so much on Day 1.
What many people may not know is how Trends almost never happened. Dru openly shares how he almost didn’t ship Trends.
The story behind Cuppa is similar. On March 13th, 2020, I publicly shipped the landing page of Cuppa on Twitter. But the night before I almost talked myself out of my idea. I wasn’t fully convinced. Fast forward to today, Cuppa has been out for 2 months and has over 1100 people on the waitlist, hundreds of beta users and some of the best fans any founder could ask for. I even found an amazing technical co-founder very early and we’ve had one helluva run so far.
Yet Cuppa almost didn’t happen.
What propelled me to get over my mental hurdle and just ship it?
Sharing my idea with 4 friends who simply believed in it. When I first shared the initial hunch for Cuppa, Ash was the strongest voice of support. Later that day, I spoke with Whit and Sharath who nudged me further. On the morning of the launch, as I was having second thoughts. I had a video call with Nibras who showed instant support for the thesis behind Cuppa (she’s British so maybe she’s biased;)) and that put me over the line. I discussed it later with my friends at the Zero To One Makers Club in Atlanta. They only further boosted this belief. Once I found enough belief capital, I shared Cuppa with my Twitter audience and never looked back. They have been monumental in helping it thrive! (Below’s my launch tweet for Cuppa)
What made Dru get over the hurdle and ship Trends?
Similar story. He shared his first inkling of an idea for Trends with the Zero To One Makers Club where several people (including me) supported it. But Dru shared with me later that his conviction grew 10x when he heard Edmund literally scream from his Zoom window how much he loved the idea. It’s crazy that little moments like that are what can make or break an idea. However, the reaction he received from another group of people was very disappointing when he shared the idea just a few weeks before. They were skeptical. Luckily, it didn’t deter him because he later found believers. What if he didn’t?
Here’s Dru’s tweet announcing the launch of Trends.vc
In a world of infinite abundance, the real barrier to taking action on your idea is not money. It is a lack of a Belief Capital.
Belief capital is what you need to go from an idea to launch. From thin air to Day 1 of your product. While many people have friends (online or offline), you have to be careful in who you share your initial idea with. Because a sh*t ton of people don’t know a thing about how incredibly fragile novel ideas are and will simply talk you out of your best ideas. This can be because of their sheer ignorance or internal insecurity that you might succeed. Or to put it less harshly, the idea may not simply resonate with them for inexplicable reasons. That’s all!
On the other hand, the Belief Capitalists are those people who actually talk you into your launching your idea.
Self-doubt is the biggest killer of dreams. Belief capital acts like a protective shield against self-doubt and is probably the most under-valued capital out there.
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What is Social Capital?
Social capital plays a central role AFTER you launch your product. It is the momentum you attract after Day 1 of your launch on the Internet. This is where many ideas hit the ceiling and never reach escape velocity to be relevant widely.
Jason Calacanis once wrote a blog post on how Silicon Valley is entirely built on social capital. (can’t find the link)
There’s a sense of awe and appreciation for cool things people build even when it is immediately impossible to fathom how it’ll make money. This makes Silicon Valley the ultimate ecosystem for a product-minded founder. To put it in other words, SV is the ultimate playground for tinkerers building toys. And most ideas are just toys in the early days.
If you are a founder or an early hire at the FAANG companies, Silicon Valley investors, partners, and angels always assume you are building the next big thing. Because they don’t really know what might take off. And they can’t afford to let the next big unicorn slip right under their nose. So they care about your experiments and take bets on the jockey (founder) even when the first lap’s form looks crappy. That’s why social leverage matters a lot. In many ecosystems outside of SV, building toys/experiments is highly discouraged and the focus is always on generating revenue from day 1. This limits founders’ creativity and imagination.
Belief capitalists can give you local leverage but only social capitalists can give you global leverage. And you’ll need global leverage for your idea to reach escape velocity. Global leverage comes in the form of a big influencer in your related field giving your idea/product a shout out, signing up as a paid user or sharing with their network.
Social capitalists share your early traction widely and generate momentum for you.
Your initial idea could be interesting to a small set of believers but if you don’t get interesting influencers to even take a look at it, you are not going to be globally relevant. You still might be relevant locally within your city’s tech circles but not at a global level like Spotify, Uber or Airbnb.
But how do you make people care about your idea? Build an audience of interesting people on the Internet (Twitter makes it easy) and simply be nice to them like you would in real life if they lived in your city. You would 100% be nice and care about your neighbors - just extend that to your virtual neighbors too. Online communities like Product Hunt, Indie Hackers and Cuppa help you extend the reach of your idea beyond your city limits.
Lastly, it matters not what your ideas are but who you surround yourself with both online and offline.
Be around doers, givers, and optimists. The future is built by people who take action not the ones who only find flaws in every new idea.
If we were to create a great breeding ground for founders in any city, we’ll need plenty of VCs but more importantly we need a solid set of belief capitalists and social capitalists playing long term games with long term players.