You have a fantastic idea… and you want your friends and family to help you fund it. The fact is, many of the world’s largest companies were financed by and started as family businesses, such as Carnival Cruises, Nike, Samsung, and Volkswagen.
How do you tactfully ask for family and friends to invest in your business?
There are many approaches to help you in this pursuit of funding your invention, product, or app idea. Let’s go through how to prepare for the investment conversation and an outline of what to say to get money for your plan.
Who in your circle of friends and family already has a thriving network? Who is already working with people who have experience in entrepreneurship and startups?
Grab a paper and start writing down people you know that are mortgage brokers, realtors, radio or broadcasting professionals. You will also want to look at connections you have with financial advisors, insurance agents, business owners, accountants, or politicians. Don’t filter the list – just write down their names even if you don’t know them well personally. Another family member might be able to do the introduction for you.
Now pick your top 5 and move their names to a new sheet of paper – we will need this in step 2.
You just need to ask for what you want, or else you’ll never get a “Yes!”. Remember to be yourself however you decide to break the ice. Even if it’s awkward just be yourself.
It’s much easier to break the ice with people you have a good rapport with. These people consist of relationships built via social media or in person.
You have picked 5 people to speak with on your list of people. Now, what should you do next?
When we know the personality of someone, we can make sure we provide the information about our idea in the format they would like to receive it in.
Next to your top 5 people, write down what personality you think they are:
Analytical people need numbers and charts. Emotional people want to know how the idea will make other people feel. Quick to act people want to know the high-level facts and not get bogged down by the logistics of it all. Slow and contemplative people want to see all the research that you have done or surveys of your target audience saying you are a great fit for their need.
Write down your current observations for each of the people you plan on approaching. Which style will best speak to them?
If you have ever watched Shark Tank, you know that the Shark’s are typically trying to gather these basic pieces of info to decide if an opportunity is a good match for them:
Creating a quick pitch deck in a Powerpoint presentation or putting this information on note cards can help you cover all these points. Check out our Pitch Deck article for templates and suggestions on preparing your presentation to share with family and friends.
How can you communicate how passionate you are about your idea? How is it going to change lives and that people want it? Have you researched the risks and rewards of the business? Have you looked at what your competitors are offering and how much they charge?
“You Don’t Build A Business – You Build People – And Then People Build The Business.”-
Preparing a presentation and actually starting the conversation are two very different things. Many people create a presentation – but never actually ASK anyone to invest because the conversation is hard to get up the nerves to have.
Don’t worry. The conversation structure below makes it easy and helps you to stay on track.
Breaking the Ice
Starting the conversation is always the hardest part. Signup to get our Text, Email, and Call Scripts Templates for asking family and friends to invest in your business as soon as we release them.
Show proof of concept for investments that succeeded
Research the most recent successful startup projects you can find. It’s ideal to show them entrepreneurial inventions that have succeeded. Look up successful products from Shark Tank or reference the investment success samples we provided in this SlideShare. “Have you ever heard of any of these super successful businesses/inventions/ideas? I am so excited to get your feedback on my idea.”
Show your idea’s potential
Now is the time to show your pitch presentation. Remember to target your approach based on their personality style and to cover the main information that investors want to see in your business pitch. Need help creating a great presentation/pitch deck for your idea? Check out our other article: How to Create Investor Presentations.
Discuss the financial opportunity
The next questions from the investor will revolve around compensation. Common compensation plans include profit share, partnerships, or interest paid on a loaned amount. Much of the advice given on Shark Tank is to retain as much of the ownership of the business as possible at the beginning of the venture. They suggest this because as the business grows, you’ll need that equity to get more partners into the business. You’re going to need to do some research to determine what the best profit share is for your business.
“As you know my idea is at the startup stage. I wanted to know if you could loan X dollars and I’d give you a promise to pay you back within 36 months with X as an interest rate? We will secure your money with the promissory note and have it convert into shares. What’s do you feel is a fair interest rate?”
Some family members will loan the money interest-free, regardless of what kind of deal you receive. Make sure it’s put on paper for clarity’s sake.
“I’m looking for funding and was wondering if you could help and how much you’d feel comfortable loaning to me for this idea?”
Be sure to write down all the questions people ask, objections, concern and positive responses you get. This will help to improve your pitch.
IdeaPros is a Super Venture Partner™, guiding entrepreneurs with great ideas through the complexities and pitfalls of the startup world. Set on elevating the success rate of new innovative products and apps, their team leverages their collective experience to create demand among consumers and maximize upside potential for their partners.