The video explains how to approach friends and family for initial funding, highlighting that this is often the first capital a startup secures. It suggests leveraging these relationships for practice, funding, and networking opportunities with other potential investors.
What this video covers
Ultimately, friends-and-family, it’s going to be the first money in. It’s going to be the first people or the first potential investors that you’re going to be coming across. In today’s video, we’re going to be breaking it down as to how you’re able to get in front of them in a powerful way and close them. With that being said, let’s get into it.
Pitching friends and family. Essentially, the main reasons why you’re going to be pitching a friend or a family member is going to be because you want to 1) Practice, 2) Gain money from them, 3) Have them open the doors to other contacts that they have in their network.
The number one is to get money from them. It is the best and the easiest money that you can get. It’s essentially people that love you. It’s not going to be a full-blown due diligence that you need to go through in order to get that money, and it’s going to allow you to get that first trench in of cash that you can deploy to build something into something meaningful that later on, you can use to convince the more sophisticated institutional investors like venture capital firms or even angel groups.
The next one is, obviously, to practice. The last thing that you want to do is to go to a very sophisticated venture capital firm or an angel that has invested in hundreds of startups that could make it or break it for you, and you’re not buttoned up.
The next thing, at the end of the day, is that they can have a great network. Maybe your friend or your family member has access to someone that could be a gamechanger for you, someone that can help you with access to distribution, to subsequent rounds of financing, to an M&A opportunity of someone else looking at acquiring you.
In terms of the place of the friends and family round, this is going to be the very initial trench of money that is coming in. Before you even think about a seed round, a Series A round, where you have angel groups, angel investors, and venture capital firms, friends-and-family is really the first money in. That’s before anything.
When it comes to the pros and the cons of friends and family, the pro is ultimately that these people love you, they trust you, they care about you, and they want you to succeed. They’re not going to ask for a lot of due diligence, a lot of questions, a lot of documents because they already trust you. Trust is present. And believe it or not, trust is everything when you’re looking to raise money. That’s definitely a pro that is going to allow you to get that money in quickly so that you can deploy and execute very fast.
When it comes to the con, your Thanksgiving dinners and your Christmas dinners are going to be all about conversations around the business; they are going to be all about following up on how the valuation of your business is growing over the course of time. Don’t forget that if you’re not able to deliver on your promises, and the business doesn’t perform, and perhaps it’s even failing, some of those relationships may be hurt and affected. So you want to be very careful and really consider this when you’re taking money from your friends and family.
Curating your pitch deck for your friends and family. When you’re curating your pitch deck, keep in mind that you’re going to be keeping it from 15 to 25 slides, so it’s going to be very straightforward stuff. You can even use the pitch deck template below, that you can see on the comment section below. It’s for free, and it is used by founders all over the world to raise millions. You can literally grab that and optimize it to whatever you’re looking to accomplish.
The next thing that you want to do is, remember that this is sales, so you’re never going to close it on that first touchpoint. You always want to constantly follow-up. Follow-up because the sale always happens in the follow-up. What you want to do is, rather than continuing on the follow-up via email, take it to text, MMS, or WhatsApp, because those are underused methods and channels.
