Investing in your startup is not always all for one and one for all

Image Source: businessinsider.com

Family and friends are there for you—when you go through problems, experience joy, or even when you need money for a new business. But according to an article in Forbes, your family and friends should be among the last people to ask money from for something as risky as a business endeavor.

If ever you did make the deal with your family members or friends, there will always be two scenarios to consider—either your startup fails or it succeeds. Unfortunately, the chances for failure will most likely be quite high for comfort. If your startup fails, you will be losing money that your initial investors might not have had the luxury to lose. This can lead to conflicts which can weaken, or even wreck, relationships.

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Moreover, success doesn’t always mean the absence of potential trouble. If your startup succeeds, there is a high chance that you would need to refinance it. In order to raise your additional capital, you may have to approach professional investors.

The thing with professional investors is that they place emphasis on making money. Most of them will impose preferred terms that will grant them special treatment over your initial investors. This can result to possible confrontations between you and you initial investors—your friends and your family.

Image Source: forbes.com

In order to remedy this, you should find professional investors and making them part of your initial investors. They can help improve your standing with your expertise. Furthermore, when the time comes to look for additional capital, they can use their knowledge to help secure the well-being of your initial investors as they belong to that group as well.

Business is rife with risks, and oftentimes, it helps to not involve people who are close to you lest they become affected by any loss you and your business incur.  


As an entrepreneur and quantitative analyst, Srikant Krishna, formerly a resident of Lincroft, NJ, is knowledgeable in the movement of markets. Follow this Twitter page for updates on markets and the economy.