Raising a friends and family round of funding can be tricky for a lot of reasons. I’d like to tell you that it is the second easiest place, after funding from founders, to raise a round of funding. But for many startup founders, a friends and family round can be something they would rather avoid.
I probably don’t have to go into detail why startup founders can be hesitant to raise a friends and family round. Simply imagine the stress of potentially losing your parents retirement or your best friend’s savings that he planned to use for a downpayment on a home.
If you are going to raise a round from friends and family there is one key activity that those funds should help you accomplish.
A friends and family round is all about validation
In my Funding Power Pack course, I talk about the various sources of funding available to founders. I also mention how hard it can be to get funding from each source and what the typical funding amount might look like. With friends and family, you are usually looking at less than a $100,000 in funding.
That amount should be more than enough to accomplish the one key activity you need to during this stage of funding. That activity is validation.
Actually, $100,000 is more than enough to validate your idea with. In fact, in today’s technology-driven world, you can likely validate you an idea for less than $1,000. Heck, you might be able to do it for a few hundred dollars.
Just remember that you want to add an action to your validation process. I talk more about that here.
Getting your idea fully validated is critical to being ready for the next round of funding we will be talking about on Wednesday.
Have you considered raising a friends and family round or actually already done so? If so, how did it go? Has the relationship become strained for any reason?
Please share your thoughts below in the comments so that we can learn from each other.