What is the key to a successful venture? Some may say hard work and dedication yet as time goes on opportunities often go to those with an inside track or connection. Is it all about who you know then? These people often run into adversity as they step into fields where others with more experience and extensive qualifications are currently competing. This mine field is something that everyone in the business sphere must deal with and comes down to credibility and networking.
In the section Wasserman begins to discuss the different requirements and questions that an entrepreneur should be asking themselves before they make a risky decision, that like discussed earlier in the book, will have long term consequences on both the firm and those associated with it. Through the process of evaluating oneself and the resources at one’s disposal it is important to weigh the passage of time and whether it will positively or negatively affect the opportunity you are pursuing. While using examples of entrepreneurs that have previously been successful, we see Wasserman contrast ventures and resources to determine the proper procedure for launching a successful venture.
By all accounts it is much harder to start a business without experience in the field and the connections that comes along with it. For younger entrepreneurs it can be incredibly difficult to get in contact with those towards the top of the system. Working internally may expose you to others that are transcending within corporations. These connections overtime may become valuable in ways not previously conceived. The drawback of establishing this groundwork is a sacrifice of time that could otherwise be used to develop the venture. An alternative Wasserman points out for youthful prospecting founders includes the use of school resources such as fellow students and professors.
While looking into the social capital and networking I came across the 6 degrees of separation. When considering whether establishing a network is important one should consider the fact that on average any person is connected to any other person anywhere in the world by 6 contacts. This is already incredible to imagine, but during my research I found that Facebook recently did its own study to test whether the world is becoming more connected as their company mission statement suggests they strive for. According to their study
“Each person in the world (at least among the 1.59 billion people active on Facebook) is connected to every other person by an average of three and a half other people. The average distance we observe is 4.57, corresponding to 3.57 intermediaries or “degrees of separation.” Within the US, people are connected to each other by an average of 3.46 degrees.”
This begs the next question of how important these contacts can be when used correctly. This reminded me of a section in the book “pencils of promise” written by Adam Braun. In the book Adam describes his journey going from someone with a dream and no resources to the founder of one of the world’s most influential educational non for-profit organizations. One of the pieces of advice he offers is
“It’s the presence of others who are smarter, kinder, wiser, and different from you that enables you to evolve. Those are the people to surround yourself with at all times.” If one doesn’t give themselves the chance to establish these much-needed connections through their actions, then they won’t have an environment that encourages personal growth.
According to Adam the social circle that you surround yourself with is the most important component of successfully seizing opportunities.
This wishful and philosophical thinking is a great exercise for one to use to consider the potential of his firm, but it doesn’t pay the bills. According to BusinessKnowHow.com one of the top reason’s businesses’ fail is because the founder underestimates the capital required to establish a venture. Nothing brings a person with their head in the clouds back down to earth faster than a bank statement or financial failure.
Yes, entrepreneurs are defined by our society as the ones that shatter the mold and take the risk but by no means should someone blindly follow a hunch or dream without weighing the possible pitfalls or shortcomings that may arise. In the beginning of a venture it is important to understand that negative cash flows should be expected. Most entrepreneurs don’t receive a paycheck for the first several years that they are in business. Taking the time to develop social capital in the work force and gain experience in a desired field can be a hugely beneficial missed opportunity for entrepreneurs rushing into business. The financial security that comes along with a constant paycheck can not be understated and should not be expected during the early stages of one’s venture.
This section is not meant to scare any potential entrepreneurs out of investing but rather to emphasize the importance of careful and strategic planning. With all the freedom that comes along with the new position and the excitement at the prospect of flight, remember Icarus and keep an eye on the ground
The first step is almost always the hardest to take when it comes to a venture and the risk almost always falls entirely on the founder. In another section of his book Adam Braun talks about his first step of depositing money into a bank account to kickstart his dream. With just $25 to his name at the time he took a step that would seem reckless and foolish to anyone with common sense. It is the idea of instincts and common sense however that often misleads many. An entrepreneur can mitigate his overall risk through small experiments that test the waters without the financial risk of destroying one’s credibility and financial holdings. By doing this a person can start taking the steps needed to convince others of their dream while learning about themselves and their ideas credibility through real world market tests.
Both financial and social resources are needed for an entrepreneur to get off the ground and start their firm. Just like the previous blog post regarding the resource dependency theory these decisions must be weighed in order to maximize value in mitigate risk. This section of the book is important to take to heart because it discusses the importance of timing and development in the firm’s early life. It is up to the entrepreneur to take the necessary steps to gain the experience and finances needed for the future without sacrificing too much or showing your whole hand.
References
https://libjournals.mtsu.edu/index.php/jsbs/article/view/112
https://corporatefinanceinstitute.com/resources/knowledge/finance/business-life-cycle/
https://www.businessknowhow.com/startup/business-failure.htm
Tom Green Entrepreneurial Blog 
Great post! I agree that it is much more difficult to start a business without any experience in the field, and that both financial and social resources are a necessity for all entrepreneurs. I also agree with your statement, “It is up to the entrepreneur to take the necessary steps to gain the experience and finances needed for the future without sacrificing too much or showing your whole hand.”
It is important to gain as much knowledge and experience as possible before starting a business. There have been some companies that have had disastrous product launches due to an obvious lack of entrepreneurial experience and business acumen on the part of the entrepreneur, which resulted in losses in the millions. I could not imagine the embarrassment as a result of a failure on that large of a scale, which is why I think that it is important for individuals that lack experience to start small.
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Thanks for the feedback!
This exercise was great for contrasting the tangible and intangible parts of starting a venture. I tried not to draw conclusions as i was doing my research, but the development of a diverse network had clear benefits that simply having enough money wouldn’t provide. I would also offer to you that failure is not the end of the world whether its big or small. Don’t be afraid to admit when something isn’t working. The people at the top in any industry are those that see failure as a chance to improve themselves and correct their judgment. Always remember to “Fail early to succeed sooner!!!”
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Thomas,
It can be extremely difficult to start a business in a field with no prior experience in that field. Like you said, one reason is their are no connections if you don’t work and interact with individuals of that particular business type. It is through our direct field of speciality that we meet individuals which in turn provides potential business relationships. It’s a lot less work if you have established a list of contacts that you can reference to. Great comparison with the connection people using Facebook statistics. Social media is well known and how most individuals connect and stay up-to-date with events and businesses. Our social circle does reflect who we are as a person based on the people we are associated with. In a sense those individuals define us and our achievements by word of mouth. We as entrepreneurs must invest the necessary time to establish ourselves both financially and socially. Great discussion on our assigned reading.
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Thomas,
This topic was really enlightening. I had not considered the social capital someone brings to the table as much as I had, financial capital. In business relationships are an integral part of growth, so it makes sense to seek out individuals the bring social capital to the team. It in itself could translate into financial capital, through a third party. I think it is also helpful to have people in the executive levels of a company that have a more charismatic disposition, because they tend to have the ability to captivate the attention of their audience and communicate the vision in a way that can lead to more opportunity. They also tend to bring out the introverts in the business who don’t tend to “toot their own horn.”
Ellie
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