Entrepreneur’s Journal: Raise money from friends, family and fools?
Posted by: in Small BusinessFiled under: Small business
Like many others, a friend of mine is having troubles with her business. And, to keep going, she needs an infusion of capital. However, because of the credit crunch, she can’t get a loan.
So what are the alternatives? Well, she is thinking of raising money from friends and family (F&F). In fact, she thinks she has the ability to get about $100,000 or so — which is enough for her current needs.
But, of course, she’s concerned about the process. What if she is late paying back the loan? What if the economy suffers for a long period of time?
Well, here are some things to consider:
Act as if you’re preparing a pitch to a venture capitalist: No doubt, you can get into a lot of trouble if you get F&F funds on an informal basis. Simply put, you’re vulnerable to misunderstandings.
Take Tony Seba, who started PrintNation.com. To launch the business, he raised $500,000 from his mother and brothers.
However, he pitched his deal in a professional way. For example, he put together a business plan and investor presentation (which took several months). He also assembled the necessary legal documents.
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