
Intro to funding: Friends and Family - mattculbreth
http://www.burningdoor.com/askthewizard/2007/03/introduction_to_funding_friend.html
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jwecker
I know a man near San Diego who started a business and borrowed from friends
and family. The business didn't take off like he wanted and he got very
depressed- feeling like he had let down all of those friends and especially
family. He took his life shortly afterwards which was obviously the last thing
any of us would've ever wanted.

Make sure that those who invest understand what kind of a risk it is. If you
ever catch yourself saying to someone close that you don't see how it could
fail, or offering a huge rate of return and yet saying that it will almost
definitely be successful- then you yourself do not understand the risk and
probably should probably take a reality pill. Oh, also, if you ever find
yourself accepting an investment from (usually a family member) someone who
will absolutely need that money back in 6 months or else their standard of
living will be adversely affected- you're doing something wrong- you are not
managing risk as you should.

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mattculbreth
Good post. Yeah I wouldn't do this unless two things were both true: 1) The
person could afford to do without the money for quite some time, 2) I was
pretty sure it would succeed.

It's awfully hard to gauge #2 when it's your idea and you've got yourself
emotionally wrapped up in it.

I'm beginning to think there's an entire class of startup funding that needs
to be written about a bit more--spouse support. If you're married and your
spouse can earn enough money to pay for the household for a discrete amount of
time then that's perhaps the greatest bootstrapping source imaginable. Seems
like a few of us here (from other posts I've seen) are considering this.

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r0b
For the serial entrepreneurs among us: it's important to keep in mind that you
only get one shot with friends and family money. If you don't succeed, and
decide to move on to another idea, your friends and family will be very
reluctant to invest in yet another venture. This can be problematic if you're
the sort of person who likes to jump from idea to idea.

I financed a company a few years ago with a small amount of money from family,
and ultimately it didn't take off. I'm now very hesitant to approach them
again. I wish I had been a little more cautious before deciding to take that
route...

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ced
Maybe it's better to take a loan from them with clearly defined terms. That
way, if all fails, you can get a job and pay it back. No emotional damage.

