0M for a pre-product company.
Explicitly warn investors they could lose their entire investment. This builds trust.Consult a startup lawyer on accredited vs. non-accredited investor rules. Don't guess.Send concise, regular investor updates after you've cashed the checks.
Stop Calling It "Friends and Family"—It's Your Pre-Seed Round
Let's get one thing straight: a "friends and family" round is not about collecting favors. It’s your first, and often most critical, financing round. The money is real, the legal risks are real, and the potential to detonate your most important personal relationships is catastrophic.
Treating this as anything less than a professional process is the single biggest mistake founders make. You aren't asking for a handout; you are offering a high-risk, high-reward investment opportunity. The moment you frame it that way, you start making better decisions. This is your pre-seed round, and it sets the tone for every round that follows. A sloppy pre-seed is a major red flag for professional VCs.
Before You Ask for a Dollar: The Three-Step Setup
Never start a single conversation without knowing exactly what you're asking for. A vague "Want to invest in my company?" is an amateur move that leads to confusion and puts you in a weak negotiating position. Do your homework first.
1. Define Your Target Raise and What It Buys
Before you know what instrument to use or what cap to set, you need a number. How much do you need to hit the milestones that will attract your next round of funding? This is typically 12 to 18 months of runway.
Build a simple spreadsheet budget:
- Salaries: Your own (modest) salary, plus any co-founders or critical first hires.
- Key expenses: Software, marketing, legal fees, etc.
A typical pre-seed raise is between 00,000 and $500,000. For example, a
50,000 raise might cover one engineer’s salary for 18 months plus essential overhead, giving you time to build an MVP and land your first ten paying customers.
2. Choose Your Instrument: The Post-Money SAFE
Your friends and family are not professional investors. They don't want complex terms, and you absolutely do not want the legal nightmare of negotiating them. The goal is speed and simplicity. The industry standard is the post-money SAFE (Simple Agreement for Future Equity).
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