As discussed earlier, the best way to look for startup funding in the family and friends’ circle is by filtering potential investors first, i.e. business minded friends and family members or affluent friends of friends and relatives of relatives who are eager to support new business ideas and would love to be a part of an innovative venture. (Take a look at Whom in the Family & Friends’ Circle You Should Ask for Business Funding).
Once you are ready with the list of potential investors in the friends and family circles, make sure to contact them professionally and have following items ready with you.
1- Your Business Plan: Not necessarily to have a detailed document. One page business plan will suffice thee purpose. Basically, you need a well documented business proposal for them. Do check this article about a business plan that attracts investors.
2- A Pitch: Make the investment and the ROI very clear to them, i.e. how much you want them to invest in your business, what risks are involved, and what return they should expect in what particular time. That’s the point where your pitch will play, i.e. how you convey them the benefit is the key to success. Check this article about startup investment risks and returns and you should better be able to develop a convincing pitch.
3- Investment Options: This depends on the fact that how much amount you are looking for and whether it will be from single person or multiple people. So, have the investment plans ready, i.e. it is better to have two or more options. Generally, the bigger the investment is, the better return is offered. Moreover, if you are planning to raise capital from multiple small investments, you can still have multiple options based on the time frame in which the return is expected, i.e. the more time an investor keeps his money, the better return he will get.
Now, as you are ready with all the prerequisites, decide a suitable time to discuss it. Definitely it’s not good idea to bombard them with the stuff in a cocktail party or a family gathering. Yes, in such parties you can ask them if they are looking to invest in startups and to schedule a meeting where you two can proceed the actual discussion.
After having a proper meeting schedule the best way is to provide them with the handouts first for their review. The handouts may include your one page business plan, a quick note on benefits of investment (bullet point) and the terms for investment based on the plan you are offering them. Once they have reviewed your document, the next comes verbal communication and this is the time where you can better use your skills to attract the investment.