The Friends and Family Round
Rick reminded me of a topic that is worth discussing, if only briefly. I’m not a fan of the so-called “Friends and family round”. Plain and simple. If you want to raise money for charity, that’s one thing. But asking your friends and immediate family to “invest” in your start-up scares me.
Valuations are invariably too high, and in the absence of a professional angel investor it ultimately means that other than some seed capital, there’s little else that comes with it. And upside for the investor is more often than not one of the things that doesn’t grace the investors’ doorstep.
An acquaintence once used a line with me that is a classic: “We’re big boys, we know the risk”. I think that’s true, until things don’t go well. Losing your family even $20k will make for a few frosty Thanksgiving dinners. And I’ve heard of $500k investment wipeouts.
I’m going to a breakfast seminar tomorrow being put on by Suzanne Dingwall Williams, and will come back with the other side for you.