The most common early funding.
WHAT MAKES IT ATTRACTIVE
Speed Trust Fewer formalities
WHAT MAKES IT DANGEROUS
The relationship is at stake, and it is worth more than the money.
WHAT TO ESTABLISH FIRST
Whether they can afford to lose it.
WHY THAT FRAMING
Most early businesses fail, and this is the honest question.
WHAT TO SAY EXPLICITLY
That they may lose everything they put in.
WHY
Unstated risk produces resentment that never resolves.
WHAT TO DOCUMENT
Whether it is a loan or an investment The amount Repayment terms, if a loan What share, if an investment What happens if the business fails What happens if they need the money back
WHY IN WRITING
Recollection diverges, and family disputes about money are the worst kind.
WHAT TO AVOID
Vagueness about whether it is a gift, a loan or a share Taking money from someone who cannot afford it Accepting more than you need
WHAT TO ESTABLISH ABOUT INVOLVEMENT
Whether they expect a say.
WHY
Assumptions differ, and they surface during difficulty.
WHAT TO PROVIDE
Honest updates, including bad ones.
WHY
Silence is what damages the relationship, more than failure.
WHAT TO DO IF IT FAILS
Tell them directly, and early.
WHAT TO PROTECT
The relationship, deliberately.
