“It is one of the most beautiful compensations of life that no man can sincerely try to help another without helping himself.” — Ralph Waldo Emerson
For anyone who’s tried to raise investment capital for a start-up business, the term “Friends and Family” is an early addition to your financial vocabulary. It comes from the fact that when you’re just getting started, your friends and family are the only people you can convince to help you get your crazy idea off the ground.
Unfortunately, the term Friends and Family is usually appended with another “F” word: Fools. Venture capitalists and angel investors use the term all the time, as in “how much have you raised from friends, family and fools.” More often it’s just “how much F-F-F money have you raised.” I’m not kidding, they really say that. All the time.
And it makes me angry, so I’d like to give big props to all the F&F (just two Fs) out there and encourage them to keep believing in their crazy entrepreneurs. These are people like my room mate from business school and her dad, and the best man at our wedding, and a dear cousin who came into an unexpected inheritance – just to name a few. All in all, 12 friends/family members accounted for just over 25% of the total I raised over five years and most of that was invested at the very beginning, before I ever made a single bar of soap. They believed in me and my crazy idea, and I couldn’t have gotten as far as I did without them.
Without F&F, a lot of successful businesses would never get past the idea stage. A lot of innovative products and services would still be just a dream rattling around in a frustrated entrepreneur’s head instead of breaking into the market where it might do some good. Plain and simple, F&F investors support and encourage creativity in our economy which, unfortunately, appears to be on the wane. This blog post on The Vanishing Entrepreneur and the underlying article “The Slow-Motion Collapse of American Entrepreneurship” from the Washington Monthly give some sobering statistics on…well, the titles pretty much tell it all.
Access to capital is a big contributing factor to the decline in entrepreneurship according to the blog post/article mentioned above. It certainly was in my case. Even though I was able to raise nearly $1 million over the course of five years, it took me almost all of those five years because I could only get it in small chunks, and thus fundraising became a full-time job. Here I thought my job was to launch and grow a company…. Since I started working in earnest on TrueBody (i.e. quit my “day job”) in January 2008, I had only five consecutive months – from Aug-Dec 2010 – where I could put 100% focus on building the business. As a result, sales grew 94% in the following 12 months, imagine that! And imagine what more I could have done if I could’ve kept that laser-beam focus on growing the business. But in the winter of 2011, I was back on the money trail again.
I’ll tell more of this story in the book. I just wanted to show my appreciation for all my friends and family who believed in me. And even though they did not see a financial return from their investment, don’t you dare call them fools.
The True Story 