Asking pals for seed cash | Life

DEAR READERS: You’ve got what you think is a great new business idea, you’ve done preliminary research, and you’re ready to go – except for one important step: you need seed capital to get started. How can you offer a compelling pitch to friends, family members or business partners who might want to invest in your new business? Are the dos and don’ts to be observed?

Financing is always a challenge for any business – and it can be the crucial aspect of starting your own business.

According to Lorne Noble, Founder of Simple Startup, the good news is that friends, family members, and trusted coworkers – the people who typically attract new business owners to invest – want the best for you.

“You will have a higher risk appetite than an investor who doesn’t know you,” says Noble.

Getting close to people you know can also have an added benefit.

“It’s a good litmus test,” says Noble, who explains that if you have trouble raising money with family and friends at the beginning, you could face even more financial problems.

If you’re in the process of raising funding for a new business, there are a few tips you can follow to get you off to a great start.

  • Make your pitch professional. “You want to show (a potential investor) that you are treating them as a normal third-party investor, not just a donor,” says Noble.
  • Make sure investors have done their due diligence. Give them what they need to understand business – what it is now and what it may be in the future. “Display an official pitch deck that supports financial data and future financial opportunity,” says Noble.
  • Ask for honest feedback. Family and friends may not be comfortable expressing doubts about your idea. Make sure you encourage them to be open and honest. “Don’t allow them to make you feel false,” says Noble.
  • Make the agreement legally binding. If someone decides to invest, make sure you have legal documents showing the agreement between the parties. “You want to show them that this is a formal investment,” says Noble.