Show me the seed money

March 4, 2020

Seed money – to borrow or not to borrow from family? Early in my career I heard directly from a guest lecturer, an entrepreneur, “don’t take money from family.” This person then reiterated, “whatever you do, DON’T". The point was belabored, enough to where it stuck with me and then, I went on to completely ignore their advice.

 

If you are already in a family business or have taken money from friends and family to start your business, you know that it can be challenging. So how can you continue down the path of borrowing or working with this close group and still emerge on the other side with your relationships in tact?

 

1.    Establish expectations - When expectations are agreed upon (up front) it lessens frustration. Consider formalizing borrowing conditions and plan to communicate progress in routine investor updates. Communication is key to any successful venture, this includes sharing difficult news along with the good. Avoid going dark on the people that believed in you enough to sign over savings. Also, clearly articulate individual areas of responsibility with visibility into activities and accountability for results.

 

2.    Guidance - You can only go to friends and family for so long before they may begin to question why they lent you the money in the first place. Seek subject matter experts or other business owners (particularly in a specific field related to your area of need). Consider joining a mastermind group or organize a dinner ‘club’ – the later sounds antiquated however breaking bread in an informal gathering with other business owners can help you reset, refuel and lead to relaxed conversation around solving some of your pressing concerns. This group will get ‘it’ and you need these people.

 

3.    Fuel yourself – Just as your body can get tired and sore, so can your spirit. Don’t ignore what makes you your best - your team (including investors) will be taking signals from you. The well-being of a founder is intertwined with their business. Entrepreneurship is tough and many seasoned founders will attest to having ignored their own needs early on. Learn from this and take care of yourself along the way. You’ll be better for it and this will reflect in your business.

 

4.    Have non-work topics on the ready - The day to day largely follows you to gatherings. An incessant string of business matters to attend to along with curious, well-meaning loved ones may result in never ending business talk encircling you. If you don’t want to forfeit the friends and family time that made you close before going in business together but your tired of all the work talk, offer up an alternative. Be ready to ask questions or share takeaways from books, shows, etc. that you have taken in. Point being, don’t lose interest in the things that initially made you interesting. Have other topics at the ready. This may feel silly, but it works when your brain can only think about your business.

 

5.    Gratitude and realism - Adopt a pragmatic approach. You did this to yourself (after all the ignored advice) so be consistent with incorporating the above suggestions. You’ve got this. Also, maintain a spirit of gratitude - you are fortunate to have people believe in you so much that they would literally invest in you!

 

All ventures have ups and downs and investors shoulder the journey with you. Are you ready to share the ride with your friends and family? Are they? Communication is at the center of all relationships. Remember this as you journey through highs and lows – difficult news should travel as fast if not faster than the good.

 

Some of life’s greatest gifts include sharing experiences with our people - our friends and family. As you go through your seed round, who do you want on this journey with you?

 

So

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