Family, friends and fools (FFF)

As suggested by the name, raising funds from FFF means using your personal network. You may be able to raise a few ten thousand dollars, maybe a few hundred thousand from them (unless you are the son of a sheikh or of Mark Zuckerberg). 

Pros of getting money from FFF

There is mutual trust, which may simplify formalities and shorten timeline.

Cons

Mixing private and business can lead to ugly situations if things go wrong.

Recommendation: When should you consider raising from FFFs?

Only raise from FFF if the following things are very clear:

  1. Transparency: Make sure the other person knows that things may not work out as planned. In fact, they should know that most startups fail. You don’t want Fools who don’t get this.
  2. Do you endanger family/friendships? Envision a meeting where you are going to tell an F that your business is failing: How does this feel? And how does it feel if you get tough business questions asked at a birthday party, with other family members or friends around? Make sure you are comfortable with both.
  3. Is there a risk of a personal issue? People get divorced, friendships may break, and “fools” who euphorically put their money into your startup after a few beers could turn out to be a big trouble makers in future rounds.

If you fully understand the risks and feel that they are acceptable it is ok to raise from FFF.

And of course, compare getting money from FFF with other potential financing sources. Phase 6c describes the different options in detail.