Ask A VC #6

Question:

Planning on creating a startup and looking to raise some angel money to kick things off. I want to raise money first from friends and family. Any advice?

Answer:

First off, although it might be called the friends and family round, I suggest exercising caution in actually taking that round label seriously.

Note that most startups fail and if you lose all your capital you might find your family and friends to be a little upset. So make sure they know the risks and that this is disposable capital for them since they may think this is the new gravy train and trust me, it’s not.

Also make sure you do the paperwork right and structure it as a proper note and treat it like all other investors. Maybe sweeten the discount but don’t do silly stuff like promise to pay it back early or do non-standard terms that scare off your future institutional investors.

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