Tue, 21 April 2020
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
I’m often asked if you should you take money from family and friends to fund your startup.
Outside investors will look at family-and-friends funding as a sign of support for your business.
If your family and friends won’t invest, why should the outside investor invest?
Many startups are reluctant to take family-and-friends funding because Thanksgiving turkey tastes different if things don’t work out.
In addition, there’s valuation. I’ve seen some startups give their family a special valuation because well, they’re family.
This becomes a problem later when raising follow-on funding from outside investors. You have to give them the same valuation or higher, or your family loses their equity position.
My recommendation is to take family-and-friends funding as a show of support.
But only as a donation and only in $10K amounts from each person.
Offer to pay them back by supporting their project in the same way when the time comes.
Let’s go startup something today.
Direct download: Startup_Funding_Espresso_--_Should_you_take_money_from_family_and_friends.mp3
Category: -- posted at: 11:13am CDT