Getting your startup funded by friends and family can be the easiest, fastest, and most reliable mode of funding. But it may not work if you are targeting wrong people, i.e. not everyone in the family and friends would either be interested or be able to invest in startup.
So, if you are considering to raise capital for your startup from a pool of friends and family, you must know from whom and exactly when you should ask for funding.
Knowing this is important because, this is the only way to get your startup funded by friends and family in less time and not to mention that without least hassle. To make things working you must do a quick research whereby you make a list of people who can potentially invest in a startup and then approach the targeted people only.
This article will guide you through the details of who in the family and friends circle you should ask for finances and when should you do it.
1- People Who Have Money
Consider the individuals’ with good financial background, because funding a startup business is a high risk investment. In case if the individual is investing his rainy days saving in your startup and the idea fails, it may disturb your relationship.
So, the very first item in your checklist is to analyze people with certain amount of money which they can afford to loose.
2- The Business Brains
The best investor is someone with business mind; though there may be a lot of friends and family members who may love your business idea and want to invest, but give high priority to those who have understanding of business.
Others may not find it a pleasant deal in case if your idea fails and may your relationship get in trouble if the investor doesn’t know business ethics
3- People Who are Already Successful
Successful entrepreneurs are always interested in investing in new ventures, so look for someone like this in your circles.
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Even if someone is not your first degree connection, but some of your friend or family member can bridge the connection, consider him.
4- Avoid the People with Conflict History
Keep the people with past conflicts out of your list. At times they may seem very excited, because they have money and the business brains, but you must not consider this temporary excitement.
5- Avoid Potential Trouble Makers
Avoid people who may create additional issues out of this investment, i.e. people interested in kitchen cabinets, people with history of an unethical behavior and so on.
6- Target the First Degree Connections First
Target people in closer circles first, i.e. immediate family members and close friends and then extend the list to friends of friends and relatives of relatives.
The Bottom Line
Considering the above points will give you a very clear list of potential investors for your startup business. And in case if the above filters leave you with no one in the list, do not forcefully include anyone.