Why seeing family and friends as investors in early stage businesses makes sense

For many startups who are bootstrapping their way to success, one of the biggest hurdles to overcome is access to finance, particularly in the early days. When the business magazines and networking hubs talk about ‘closing a round of financing from a venture capital firm or a group of angel investors’, it sounds a lot sexier than securing money from your mom, dad, extended family members or friends. But the reality is that when you are just starting out, this highly personal and trust-filled approach can be just as effective in getting a company off the ground and running. Many a globally successful entrepreneur has started out in just this way. If a young startup company uses these initial funds responsibly, it could be the only funds they need to raise for quite a while. This means not diluting the company’s shareholding structure and having to meet the expectations of external investors, but instead, leaving the power in the hands of the founders when the time comes to consider a future business expansion requiring outside financing.