Greetings, Chief Storytelling Officers.

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One quick announcement: We're running the 2nd FREE Live Story Redesign event this week.

It's this Tuesday. Come deliver your pitch and watch how I redesign it to make it more investable, more entertaining, and make sure people don't pass on your round in the future.

See you there.

-Robbie

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DEEP DIVE: The Bank of Social Capital

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I spent last Sunday having lunch with a very successful and well-connected Bay Area investor in Sausalito. The investor told me about a meeting they had with a founder who’d been introduced by another investor colleague, who was also on the call.

The founder’s pitch went well, and the investor was interested—until they got to the Q&A. The founder fell apart, and it became clear that this founder wasn't backable.

The investor who’d made the introduction was deeply embarrassed. He’d put himself on the line for this founder, and the founder blew it.

While the investor might retreat briefly to lick his wounds, it’s the founder who will really pay the price for this gaffe. They committed a cardinal sin: they capitalized on a relationship and squandered it.

Whether you realize it or not, you are constantly making deposits and withdrawals from the Bank of Social Capital. Social capital is the connections, networks, and relationships you cultivate and the value those relationships provide.

Founders always think about their business in terms of financial and human capital, but business experts suggest that social capital is actually more important. HBR calls it “the grease of an organization”—it’s critical to gain investors, recruit experts, and build your team with the best of the best.

It’s only the best founders that understand how social capital works. They know that there’s far more at stake than just getting a “yes” from the investor they’re talking to during a fundraise. FAR MORE.

Here are some tips on both building—and maintaining—your Social Capital balance.

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Give More Than You Receive

Most people call in a favor WAY before they should. This results in a social capital debt—like charging a purchase on your credit card before you have the money to pay for it. When building social capital, you need to focus on giving. Invest in the relationship by adding value to the person you’re networking with.

This capital doesn’t have to be in the form of favors. It could be introductions or a sharing of resources and knowledge. The medium doesn’t really matter, because what you’re really aiming to build here is trust.

Trust is the key component to relationship building. When trust collapses, your relational capital collapses and so does your cognitive capital. Your thoughts and ideas are no longer valued because their accuracy is called into question. But when trust is amassed and maintained, your connection will want to run through walls for you.

When you make a good connection—say a high-power investor who has the potential to take your company to the next level—it might be tempting to take the plunge and ask for their help. After all, fortune favors the bold, right?

But by doing so, you’re taking an unnecessarily high risk gamble.

Consider these two scenarios:

Scenario 1: You connect with someone on LinkedIn, who messages you immediately asking you to introduce them to a former colleague.

Scenario 2: You connect with someone on LinkedIn, who messages you and says they like your company’s vision and want to introduce you to three people in their network they think might help your journey. After several months of interaction and one in-person conversation, they ask you to introduce them to a former colleague.

Which favor you’d be more willing to fulfill is a no-brainer. When you build social capital with a connection, it increases the chance they’ll become an asset that pays dividends. The goal is to form such a strong bond with them that you don’t even have to ask—they’re so excited by you and your venture that they want to do everything in their power to help you achieve your dream.

Assume that each contact in your network is really only good for one big ask. Hold that in your pocket as long as you can and only use it when it really counts.

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Every Interaction Counts

When building your social capital, it’s important to remember that it’s not just the whole of your network that adds value, but the QUALITY of those connections as well.

Each individual contact is its own microcosm, and each interaction is a series of deposits and withdrawals. Assume that every time you meet with someone, you are being given an opportunity to either grow your social capital or deplete it.

It’s the daily actions that lead to long-term wins. Even in the smallest of interactions, if you present yourself as unconfident—or overconfident and condescending—you may end up doing damage that will hurt you in the long run.

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Be Prepared

Remember that social capital has compounding effects on everyone involved. When an investor sticks their neck out for a founder and makes an introduction, it’s not just your social capital on the line. You ALSO affect the investor’s social capital. If it’s a win, everyone involved gains social capital. If it’s a loss, everyone loses.

If you blow a big opportunity—like the founder in the meeting I mentioned earlier did—you’re not just burning your chances with the investor you met with. You’re ALSO burning your relationship with the investor who made the connection.

How do you avoid such a chain of events? Follow the Boy Scout motto: Be Prepared.

The best founders are so well-prepared and polished that investors want to tell the whole world about them.

That’s the reason only a small percentage of founders get all of the investor attention. By contrast, it’s also why so many founders wonder why their investors aren’t doing more to make them look good. The reality is that they don’t trust the founder to make them look good.

Remember: Everybody has a boss, and everybody has their own social currency. Don’t be so disillusioned that you think people want to help you out of the goodness of their heart. There are many wonderful people in the world, but the harsh reality is that most people are looking out for themselves first.

This is the way the world works—both inside and outside of venture. VCs have every right to think about their social capital and protect it.

Your job is to be so good it's easy for them to say..."You should really meet one of my founders."

Keep this in mind when you’re preparing your pitch. It’s not just the relationship you have with the potential investor in front of you that’s at stake—it’s every interaction, meeting, conversation, and connection that got you to this place on the line.

All eyes are on you to deliver. When you do, everyone will not just rally around you, they’ll JUMP at the chance to get on the train. But when you don’t you’ll find yourself with a zero balance of Social Capital—fast.

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RESOURCES for Founders and Storytellers

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If you want to raise venture capital, you need to know how people have been lying to you and making it harder for you. Here's the truth of what it takes and how you can make it happen.

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Naval Ravikant is an impressive entrepreneur. Aside from his successes in the investment world, he fashions himself a modern-day sage, and that wisdom was recently showcased on a recent episode of The Tim Ferriss Show. Naval was joined by Oxford physics professor David Deutsch, and the trio got deep about the fabric of reality and the need to redefine wealth. Give it a listen here.

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FINALLY...

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One final reminder for the Live Story Redesign. You can sign up here.

"Power resides where men believe it resides. It's a trick. A shadow on the wall. And a very small man can cast a very large shadow.” -Varys in Game of Thrones

That quote applies to ideas, valuations, and far more.

See you next week.

P.S. Don't forget to subscribe to the YouTube channel with multiple weekly videos that are only over there.