So you’re setting out to capitalize (both literally and figuratively) your new venture. Should you seek to raise money from friends and family?
A recent survey from Pepperdine University’s Graziadio School of Business shows that about 13% of small businesses sought capital from friends and family this year.
Here are three points from startup mentors to keep in mind when raising money from friends and family:
- ‘No’ is not a rejection – just because you think your idea is great, it may not resonate with everyone.
- Use your own cash as long as possible – get to the point where you can clearly articulate you offering, and if possible, achieve concept validation.
- A positive signal to other investors – having a “money vote” is good, but when its from family it sends a signal that you’re all in.
- Real financial risk – if things don’t work out, family gatherings can be a little stressful.