How To Ask Your Friends & Family For Funding
Asking for money is hard. Asking for money from your friends and family is damn hard. But what else are you going to do when you’re just starting out and the big investors aren’t on board yet? It might be super awkward, but hitting up your friends and family for seed money is worth a shot.
Here are three different online platforms that you can use to start fundraising from your friends and family.
1. ProFounder
While specifically geared toward raising investment capital from your community, friends, family, and the people you hope will be your future customers, you can actually do a whole lot more with this crowdfunding website. Normally you’d just get a profile page that you blast out to others so that they can learn how awesome your business is and hopefully fund you, but ProFounder actually gives some tools to help you work that fundraising mojo. You can accurately detail the fundraising process by filling out investor planning worksheets, which will also guide you through investment compliance rules in each state. While you might not need someone to hold your hand, the platform can also walk you through a step-by-step process of creating your online pitch. Add graphs, charts, and some other shiny bells and whistles. Impress your friends and family!
At the end of it all, you can set your own investment terms, which means you decide how much revenue you share with investors and for how long.
2. LendingKarma
While it would be nice if your grandparents gave you $1 million for every birthday, many entrepreneurs get their close friends and family to loan them money instead. But loans can be tricky. On the one hand it’s not a gift, so no awkwardness there. But if you don’t pay your friends back, then that’s not only awkward but also potentially illegal.
That’s why LendingKarma helps you create a formalized loan agreement for borrowing from people you already know. It has tips on how to approach people you’re close with for a loan, and how to draw up a good proposal to show them why you’re a solid bet. You can include features to track payments and send out friendly reminders when they are due. Good for you, good for the universe.
Every LendingKarma loan is a Promissory Note that is a legally binding contract in all 50 states. So even though it looks and sounds all warm and fuzzy, it’s strictly business (just with less ugly bits).
3. 40Billion
This crowdfunding website takes its name from the $40 billion gap in funding facing startup entrepreneurs. 40Billion answers this by taking the idea of an online social network and turning it into an online funding network. Create a profile with all the details about yourself and your business, and then start inviting people to your network. When you’re ready to actually get some money (cha-ching!), start a fundraising profile called a Raise, where you explain why people should fund you. Choose to accept donations and gifts, direct loans, or commercial paper short-term loans. Then blast your Raise out to everyone you know, and have them do the same to their network. People can give you as little as $25 or as much as $10,000. Or they can give you the “invaluable gift” of wisdom and advice. These crowd funding platforms can really put a nice spin on the phrase “leveraging your friends and family,” since that just sounds like you’re selling them to the mob to pay off your debts.
But no matter how you spin it, remember that asking for funding, even from your best friends, is still a delicate matter. Don’t overload them with 50 page business plans, but don’t stroll in as if it’s just any other time to kick it and hang out. It’s your business after all.
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