Family, Friends, And Investments in The World of Startups
More often than not, when one forays into the world of entrepreneurship, we rely on the people around us. We depend on our family as well as friends for moral support and sometimes, even financial support. And why not? The people closest to us make for wonderful foundation that fortifies us in our endeavours in life. And while that is a truly reassuring thought, it would serve us entrepreneurs well to practice practicality in matters that involve your startup and financial support from your closed ones.
Allow me to explain.
Every entrepreneur who sets out to work on their venture know that they need capital in order to set the ball rolling. And even though funding is necessary, it is not always a given. This scenario becomes especially clear when you consider the very basics of entrepreneurship. In times such as these, it is quite natural to turn to either your family or friends or other close ones to seek financial help. Sometimes they will offer to provide such support without even asking. What often makes it even better is the fact that you are likely to be offered excellent rates as well as quite lenient credit standards. And in the midst of the excitement and madness of working day and night to bring your offering and startup to life, entrepreneurs must never forget one simple thing in the context of receiving financial support from friends and family: treat them like you would treat any other shareholder in your company.
Though they have given you the much needed initial funding for your venture, it is imperative that entrepreneurs make formal agreements with the requisite documentation. Why? Because the personal connection could cause family and friends to unwittingly overlook the incertitude typically associated with startup ventures. For example, their expectations about repayment could be too high. Or, perhaps, the timeframe for the repayment. There are billion different ways this can go sideways. To put it simply, if the friend or family member does not completely understand the possible risks or other details, there's a good chance it will lead to disappointment, or worse, cause severe damage to the relationship.
Another reason why documentation and formal agreements in this context is important is because if the agreement is either unclear or not properly documented, it can cause troubles in the future. Additionally, if the terms and conditions of the loan are documented, entrepreneurs can avoid any potential misunderstandings. However, it is important to make sure you follow the terms and conditions that both the parties have agreed upon.
The failure to do any of these things can have significant ramifications. And I don't mean just fractured relationships. The emotional pay-outs of a falling out with a friend or relative in this setting can be exceptionally high. And that's not something an entrepreneur needs. What they need is abundance of emotional support and to ensure that they minimise the variables of stress and issues in their lives.
To sum it all up, while working on your own venture, entrepreneurs must never forget to ensure that they align their families, shareholders, employees, and customers. Because doing this will help them keep unnecessary stress and unpleasantness at bay, which, in turn, will allow them to give their venture their 100 per cent.