Types of Capitals that Startups Need
Week 17 of Founding Typogram
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People told me that there are two kinds of startups - lifestyle startups and venture capital-backed startups; the former is slow-paced, has a good work-life balance, and grows organically; the latter is fast-paced, has money-fueled high growth, and you put your 120% in and get no work-life balance. A lot of these descriptors are overly generalized and not always true. The real difference between these two is simple: whether the startup is funded by venture capital money.
It seems to me that the money source is very indicative of a startup's identity and style. However, through my own entrepreneurship journey, I found that there are many different types of capital that a startup needs other than money.
Idea
The startup idea doesn't always need to be the most exciting, ingenious, or precisely describe the final form of your startup, but if you have one that gets you and your cofounders excited and huddle for the next steps, that is very valuable capital. You can get away with a poor idea or even no idea if you are very rich in the next capital category - talent.
Talent
A lot of startups are founded in colleges. I think it is because college is the best place to gather talents. If you have a few talented friends in college, it is relatively easy to convince them join forces with you and start a company - a very lucrative extracurricular activity. I would argue a united force of talents is the best capital an entrepreneur can dream of. Building something great and can last is only a matter of time with the right talents. However, it is very possible that talented people don't think alike or have other exciting ventures to pursue; many startup founders gradually lost momentum and failed.
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Momentum
Momentum is the capital that I found the most important in my current phase. When you have an idea and enough talent to execute it, momentum is the last piece of the puzzle. Momentum is hard to come by. There are a lot of factors that can hurt momentum: disagreement between founders, distractions from the outside, poor project management, laziness, and fear - fear of failure or even success. If a startup has momentum, it can blaze through mistakes and detours and land on the right path.
Money
Money from investors helps solve talent problems and momentum problems. Raising money plays different roles in different industries. Some startups depend on money to grow and survive; some sees money as optional. It also plays different roles in different stages. Some companies needed it in the beginning, some in later stages, some never needed it - the company becomes profitable before needing any investor money.
I wrote down these types of capital that startups needed as thought exercises when we got contacted by investors. It was flattering and tempting, so I had to remind myself what types of capital we needed at the moment - was it momentum or money? Pitching is very time and energy-consuming when our company only has two people. We need to switch context to prepare for a convincing pitch. I chose to tell the investor we are not actively fund-raising but happy to connect. That way, if we meet, it would be casual, and no one has to convince anyone of anything. This tactic helps us focus and keep the momentum on the most critical tasks.
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