How to pitch your business to family and friends? What’s the best way to pitch your friends and family with your business idea?
Family and friends play an integral part of launching and running any business. There are actually a variety of reasons to pitch them with your business idea.
Don’t underestimate their importance in your new venture, no matter how much or little you think that they can contribute financially at the beginning.
Let’s take a look at some of the ways you’ll find them invaluable, as well as the advantages and pitfalls of including them, and how to go about pitching and enrolling them in your business plans.
The Ultimate Guide To Pitch Decks
Friends & Family As Customers
While the primary reason many entrepreneurs think about pitching their business to friends and family may be for startup capital, they may also be some of your most important first prospective customers.
Even if they don’t personally buy, or aren’t the prospect for the product or service you are developing, they can be a critical part of your ‘grandmother test’.
This means testing that you can convey your business idea and value to anyone in simple terms. If your grandmother can’t get it, then there is probably a problem with your pitch. You’ll have a hard time pitching it to any other customers, partners or investors as well.
When they are your type of customers, then this is a great chance to test and perfect your sales pitch. Don’t just take their positive encouragement as a green light. Most people, and focus groups in general can be flawed as people don’t want to disappoint or offend you.
The real test is if they will pay actual money for it. You can still give your friends and family great discounts or upgrades, but unless they are willing to pull out a credit card, then you still haven’t nailed it.
Whether actual paying customers and early adopters themselves or not, this group will be your first brand ambassadors and referral sources. This is vital for getting off the ground, landing early introductions and sales, and proving your business idea.
Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Friends & Family Are Your Support System
Your family and friends are and will be a vital and instrumental part of your support system through this journey. This is why you should figure out how to pitch your business to family and friends.
Do not underestimate the importance of this. Many highly successful founders have appeared on the Dealmakers Show to share how it has been this support network that has not only made going into entrepreneurship and their dreams possible, but have proven invaluable in being there through the dark, tough, and often lonely and trying days of entrepreneurship.
Whether you are dropping out of college and it is your parents you are telling, or your spouse who is going to have to accept the financial and lifestyle sacrifices you are making, share your idea with them early.
Parents may not always get it at first. They want to protect you, but they will be proud of you for trying and when you make it.
Spouses are even more important in this. Your decision may put a lot of extra pressure on them and the family. They may have to make some sizable sacrifices for a while. It may mean betting your family nest egg and retirement or dream home down payment on this. It may mean giving up health insurance and other benefits, as well as a reliable paycheck.
It can all well be worth it. Though you really want their blessing before you leap.
It can also be important to explain this to your kids or siblings. Why are you doing this? Why is it worth it?
Get their buy in. You are going to need their support until you exit this company, and probably in the aftermath of that as well.
Pitching Your Friends & Family For Funding
Your friends, family and other members of your extended personal network will be core to getting your startup capitalized and off the ground. This is true even if you don’t feel your family is wealthy.
The friends and family round is one of the most important. It comes first before seeking any other outside investors, angels, VCs or private equity firms.
It is also often the best money you’ll ever be able to bring in.
Still, it is important to know the pros and cons and gotchas before diving in. As well as how to be prepared to pitch them well when it comes to funding your business.
See How I Can Help You With Your Fundraising Efforts
See How I Can Help You With Your Fundraising Efforts
Friends and family rounds typically fall under the pre-seed category in order of startup fundraising rounds. Though it may even come before that, along with self-funding from any cofounders. Take the time to learn how to pitch your business to family and friends.
- Series A
- Series B
- Series C, D, E
Who Can Be Included In Your F&F Round?
Pretty much anyone in your personal network can participate or be pitched in this fundraising round.
This may include:
- Immediate family members
- Extended family members
- Friends from throughout your lifetime
- Coworkers and ex-bosses
It can also be friends of family, and family of friends and professional connections too.
The Advantages Of Friends & Family Business Funding
Starting with this round has many potential benefits if it is structured well. They include the following.
When it comes to your following rounds investors will see that others have trusted you and believed in your skills and commitment already. That is a major element in their decision making.
Of course, if those who know you best aren’t willing to bet on you then, why would a stranger?
Building Confidence & Skills
Pitching and fundraising are skills. Doing it for the first time, or even second and third can be daunting for many people.
This is your chance to hone your presentation creation and delivery skills with the warmest and friendliest audience possible.
It will go much more smoothly when you’ve already had the practice, developed a system, and it flows naturally.
It’s Faster & Easier
These people should already know, like and trust you. That’s the biggest part of getting funded. Especially in early rounds.
These individuals are likely going to be less demanding in terms of due diligence, detailed terms and how much they want.
Fundraising can be a big distraction and drag on trying to get started and just growing the business. This streamlined form of initial funding can help make a big difference in those early days.
When things don’t go as planned, hopefully these early investors will also be more supportive, forgiving and patient too. So, you must make the effort to learn how to pitch your business to family and friends.
Strength In Future Fundraising Rounds
One of the big benefits of taking in this causal capital now is that you can get further along before needing more professional outside money. You’ll be in a stronger position to dictate terms, give up less equity, demand a higher valuation, and choose your ideal investors. As well as to raise a larger Seed or Series A round.
Would you like more information about how to send a pitch deck to friends and family? Check out this video I have created with in-depth nuances you’re sure to find helpful.
The Potential Pitfalls Of Pitching Your Friends And Family For Business Funding
This can be some of the best money and support you’ll ever bring into your company during its lifetime. Though you also have to know who to structure things best, and the common mistakes to avoid.
This included the following.
Jeopardizing Your Relationships
The biggest risk here is ruining your most valued relationships. Circumstances can change, and they may want their money back. They may get greedy and want a bigger cut. They may refuse to sell or allow more sophisticated investors in. Or you may just go bankrupt and be unable to return their money.
Beat this with clear legal agreements in writing, in advance. As well as provisions for breaking up amicably. Learn how to pitch your business to family and friends effectively.
Blurring The Lines Between Work & Non-Work Time
Startups can be consuming. Despite the freedom and control over your own time they offer, if you aren’t careful they will eat up 20 hours a day, including nights and weekends. When you can manage to hangout with family and friends you might find all those conversations are now high pressure ones about their investment and returns. Make sure you set clear boundaries. Block out plenty of quality time, and time specifically not to talk about work, be online or near your phone.
Bringing In The Wrong Owners
You may be bringing in people which not only won’t work with you for the best interest of the company, but may also not deliver any added value, and could be taking up equity which could yield far more value for the company. You also want to make sure your early investors can’t just sell their shares to anyone else, who may also be even more detrimental to the business.
Preserving equity can be critical, not only for attracting the best future investors, but vital advisors and key employee talent early on.
How To Pitch Your Family & Friends For Funding
The steps to successfully pitching your personal contacts for your first fundraising round include these below.
Be Mentally & Technically Prepared
Startups take a big commitment. They will take up most of your life. You need to be committed to go the distance for 10 years or more on this project, through what will mostly be neverending daily challenges that are constantly pushing you to new limits.
You also need to have done and be able to show comprehensive research. It’s not just your time and money you will be gambling on this. It is going to be that of the people you care about the most.
Understand Your Financial Needs
How much money do you need to raise? There are lots of ways to be lean and bootstrap this business. Yet, the last thing you want is it to go bankrupt for a lack of a little more funding. So, be diligent. Understand how much you need to get through to the point other investors will want to step in, or that you can be profitable and self-sustaining. Build in a cushion for error on top of that.
Evaluate how much you can give back and on what terms for this capital infusion now.
Create Your Pitch Deck
Even if your family doesn’t expect one, this is a great time to get good at pitch decks, and to use the process to gain more clarity on your business. Use an existing pitch deck template to get started.
Start Having Conversations
Now it’s time to get out there and start talking and pitching. You’ll get better each time you do it. Keep gathering the feedback and improving on your delivery. It can be easier than you think once you get into the swing of it.
Knowing how to pitching your business to family and friends with your business idea is one of the most important first steps in launching a new venture.
Structuring it right, and foreseeing the potential issues, as well as how to maximize this opportunity is all important.
Learn as much as you can, get your materials together, and get pitching.
You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.