Love Money - a Blessing or a Curse?

Tired old adages warn us of the dangers of mixing business with pleasure and money with friends and family...but when it comes to leveraging the power of the crowd to get an innovative idea off the ground, we disagree! In fact, we encourage our entrepreneurs to recruit those closest to them as backers. 


Why is it important to have friends and family as backers? In a nutshell, when you believe in your mission, those who believe in you can make you an even more attractive for corporate lenders. This attraction happens in at least three big ways:

An endorsement from those who know you best is a powerful indicator of your potential. A friend or family member has insider knowledge into you as a person--your work ethic, your track record, your fortitude, your sensibilities, etc. These personal characteristics are vital elements in the success of a project. These are also things that a corporate lender cannot know. An investment from friends and family says, "I know this person. I believe in them, and so should you."

There is more on the line for an entrepreneur entrusted with the money of family and friends. When someone from an inner circle signs on as a backer, the assumption is that there is more to lose than just money: Relationship. When a potential corporate investor sees personal lenders in a crowd of backers, they understand the consequences of failure are greater for you. They trust you are motivated to work even harder, if for no other reason than to maintain positive relationships with loved ones (and possibly to save face at the family picnic).

Backing from family and friends ensures accountability. A distinct advantage of lending to a startup backed by personal investors is increased accountability. A corporate lender cannot follow you around, peppering you with, "Hey, how's it going?" questions. But a friend can. A family member can. You see them at parties, reunions, the grocery store, and holiday celebrations. A corporate lender may feel their investment is a little safer, knowing someone is there to keep you on your toes.

When it comes to leveraging the power of the crowd, tired old adages about mixing business and pleasure and money with family and friends are exactly that: tired and old. If you have the drive and energy behind an innovative idea, seeking backing from friends and family can attract additional investments from corporate lenders. Those in your inner circle know you best; they add fire to your motivation; and they ensure accountability.

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Join our first "Global Crowd Network" for Lean Startup funding! Connect with facebook on www.ufostart.com and calculate your Startup Value. Interested in how you can leverage the power of the crowd for your startup? Like us on facebook and follow us on twitter!