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Raising Money from Friends and Family

Are you working on a business idea that you think will do wonders in the future? Do you worry that you have no clear plan on how you are going to finance it? Do your friends and family think that your idea is amazing, but you still worry not to let them down?

Well, don’t worry anymore. Just sit back and we’ll give you some amazing advice about handling these sorts of situations.

Millions of people across the globe rely on banks for helping them solve their money matters, and startups have plenty of obstacles coming their way in an attempt to get funding. For most of the people, this money or capital might just come from their friends and family.

What’s important in such situations is that there is some involvement of emotions as well when your “venture capitalist” is none other than your family or your friends.

If you think your family or parents might just be making a mistake by trusting you with their money and you feel that they’ll just lose their money in this process, don’t worry. There are a lot like you, thinking the same thing.

Here is a list of the key factors that you should keep in mind while starting this process.

  • The best way of getting money from your close people is by being honest with them. Let them know the risks and reward beforehand. It might just take you two to three months while gaining funding from friends and family, hence saving your time. They know you and your potential very well, so they are in a better position to make any such decision.
  • If your friend find your startup amazing and is ready to help you in the initial stages, ask them if they want to become a major shareholder. Sit down and have a conversation and make things clear to them.
  • Be transparent about what you feel might just end up as a loss and what would help you gain exponential results in terms of money or growth.
  • Make sure you raise your funds by more than one friend or family member. This not only would help you gain a better and expanded base, and this would help in risk protection for them.
  • It is not an easy task to manage expectations of people who matter so much to you, the best way is to communicate the ups as well as downs of your startup, in this way they can have a better idea of what’s going on internally.

The best part about making your friends and family fund your business is that once you get a chance to go to the real venture capitalists, they would have an idea that there already are people who have trusted you and have invested in your business; this basically becomes a social proof.

18 April 2016

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