How to Raise Money from Friends and Family for Your Entrepreneurial Idea

Entrepreneurship Seed Funding

How to Raise Money from Friends and Family for Your Entrepreneurial Idea

The American Dream is founded on the idea that anyone can achieve their goals if they work hard & smart enough. Entrepreneurs embody this principle, going after their dreams in spite of the uphill battles. But personal ambition and will, while necessary to win, are not sufficient.

Getting By With Some Help From Your Friends

You do not need to risk your own capital to start a company. This is a fundamental, counterintuitive, rule of entrepreneurship. Most wealthy people, in fact, use a strategy called “OPM” (other people’s money). For instance, Robert Kiyosaki, author of Rich Dad Poor Dad and other real estate developers generally don’t use their own money to buy their real estate. Others take risks for them, in exchange for a return if things go well.

Relatedly, there’s a difference between consumer debt and business debt. Business debt is a positive debt because your company (not you must pay it back. This gives you some freedom from worry. With consumer debt, you have a negative debt because you are purchasing something that will never pay itself back. The point is that wealthy people know that debt can be a fantastic tool to start or grow a business—if used prudently.
With that said, how do you entice others—specifically, family and friends—to get excited about investing in your company?

1. Bring the passion.

The people who know you best will benefit most from your excitement. They’ve seen you through thick and thin, and they’ll recognize your authentic enthusiasm. When speaking to loved ones about your ideas, emote! Show how your business can help people. Evangelize your mission. Consider, too, bringing in a strategic partner to lend credibility to your idea. The right partner can elevate your chances of raising money.

2. Don’t be afraid of the word “no”.

Not everyone will have the money to invest. Others may not feel they’re a good fit for the business. Entrepreneurs hear the word “no” a lot. Like, a lot a lot. Embrace rejection and learn from it, it’s part of the entrepreneurial journey.

Remember also that “no” means that the core objection has not been addressed. In other words, your prospect has not been educated enough. This is an opportunity for you to dig down and get to the real objection.

Now, sometimes a “no” is a no, and you need to be alert as to what kind of “no” you are receiving. Avoid getting too attached to any outcome with any one particular investor. As long as you persist—passionately, intelligently, ethically—you’ll find the support you need, eventually.

3. Ask indirectly.

New entrepreneurs often get nervous asking for money from loved ones. An indirect approach may be the way to go. Chat with friends and family about your idea. Get their input. Your enthusiasm could very well seduce them.

An indirect approach is to use “A.I.R.” conversations. This acronym stands for Advice, Information, and Referrals. Rather than explicitly seeking money from a family member–which can feel awkward–just ask for their input. This puts people at ease. It makes them feel valued, as long as the request comes from a place of genuine curiosity. Listen carefully to the feedback, get creative, and be alert for opportunities. Asking for referrals for financing, for instance, can lead to connections… or it may open the door to a conversation about how they can invest in your business.

4. Or… ask directly.

Your loved ones may prefer a blunter approach. That’s fine. Speak directly, then. Don’t hide the risks. But don’t undersell the opportunity either: the enticement of financial gain for them is real and exciting.

“Never lose the fire in your belly to go out and make things happen.” Mike Corradini, CEO & Co-Founder of IdeaPros.

If you need a strategic partner, IdeaPros is always considering exciting opportunities, whether you’re at the idea stage or ready to go to market.

Start now by filling out this form and we’ll be in touch shortly!