The Seven Forms of Capital

Q&A: Capital One’s Head of Business Cards and Payments shares a framework for small business success.

Entrepreneurs know the adage that it takes money to make money. But while financial capital is critical to the success of small businesses, it’s not the only form of capital that matters. 

Our recent Insights Center and Boston Consulting Group report found that, in addition to financial capital, a business owner’s capabilities and expertise (i.e., knowledge and cultural capital) and the presence of a coordinated business ecosystem were essential for generating wealth. 

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In this Q&A, Capital One’s David Rabkin, Executive Vice President and Head of Business Cards & Payments, borrows from an international development framework to describe seven forms of capital necessary for small businesses to prosper. 

The first three are tangible assets. There’s financial capital–money itself–as well as natural resources and infrastructure. We might think of something like oil as a natural resource, but location can also be a natural resource. For example, if you have a restaurant on the water, your location can be a contributor to your success.

I think it gets really interesting when you take a hard look at the other four forms of capital, which are less tangible, more fluid and harder to see, but perhaps even more important. These can all be viewed at a point in time, but they are also continually changing and must themselves be invested in.

Institutional capital is the governmental and legal framework within which a business exists. Do they create trust and stability? Are laws applied evenly or inconsistently? 

Human capital and knowledge capital are often thought of together, but they speak to different things. Strictly speaking, human capital is skills and abilities –or, knowledge with legs. It’s the productive capacity of the available labor pool. More generally, that means an entrepreneur’s ability to find and hire people with skills relevant to their business. 

Knowledge capital, on the other hand, refers to the presence of, and access to, specific, relevant information. This can range from patents owned by a business all the way to the ability to access a subscription to a database of relevant venture capital providers. It’s easy to get lost looking for the line between human and knowledge capital, but it’s important to build capacity in both. 

Finally, cultural capital refers to the attitudes, beliefs and values that support innovation and prosperity and that make up the business culture in a country or in a community, such as believing in competition as a force for positive change and having optimism about the future. Culture isn’t good or bad, but understanding it does offer clues to keep insiders in and outsiders out. For example, understanding social practices, non-verbal cues and knowing when “yes” means “no” or “maybe.” 


This framework was developed by my former leader, Michael Fairbanks, who was the founder and chairman of the OTF Group. Although the framework explores whether countries have environments conducive for business growth, we can use it to look at small business ecosystems. The question for financial institutions like ours, and for other stakeholders, is how can we facilitate access to all seven of the forms of capital. And how can we take the rent from the lower forms of capital and invest it in the higher forms of capital. 

Some of these forms of capital are outside a business owner’s control. They can’t change institutional capital or natural resources, but they can improve their knowledge capital and cultural capital. One way to do that is by plugging into business networks or building a personal advisory board made up of other small business owners or employees at larger companies. 

Incubators, innovation centers and others in the business ecosystem add a lot of value by helping small businesses with many of these forms of capital. Y Combinator provides a useful beacon because they provide startups with financial capital as well as knowledge and human capital, whether it’s connecting entrepreneurs with the right employees or helping them navigate contracts and legal issues.

Policymakers will want to think beyond tax credits and even grants to other ways they can help small businesses succeed in large numbers and achieve long-term, sustainable wealth creation. That could involve seeding and supporting business ecosystems.

The study really shows how the disparity of starting capital has an enormous correlation with finishing capital. The logical conclusion is to provide more financial capital. Of course, that’s part of the answer, but we should also care for access to all forms of capital. Let’s make sure that people have equal access to institutions, can access skilled employees regardless of where the business is located, can mine the knowledge they need and can navigate the unspoken social norms of business. 

Small businesses create jobs and build wealth. We want them to succeed and we want them to succeed in large numbers. I believe Capital One can play a very positive role in the enrichment of America’s small business ecosystem, through financial capital certainly, but also across all seven forms of capital.


About the Capital One Insights Center

The Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology. 


This material has been prepared by the Capital One Insights Center, a non-partisan center for objective research and insights, and is provided solely for general information purposes. Unless otherwise specifically stated, any views, analysis or opinions expressed herein are solely those of the Capital One Insights Center’s staff, researchers and listed partners (if applicable) and may differ from the views and opinions expressed by Capital One Financial Corporation, other departments or divisions of Capital One Financial Corporation, or its affiliates and/or subsidiaries (Capital One). Information has been obtained from sources believed to be reliable. 

Analysis and conclusions constitute the Capital One Insights Center’s judgment as of the date of this report and are subject to change without notice. Furthermore, the analysis and views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. 

Any opinions expressed herein should not be construed as an individual recommendation for any particular customer or client and is not intended as advice or recommendations of particular securities, financial instruments, market conditions or strategies. Capital One Financial Corporation and its affiliates and/or subsidiaries may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.

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