How did you spend your “friends & family” investment round?

We are an early stage start up considering raising funds for the main purpose of paying out modest salaries to ourselves so that we can quit our day jobs.  Thoughts?

  • Friends and family rounds are also known as “pre-seed” rounds. Your goal with this round is to get your startup to the point where you can close a seed round. To do this, you generally need a validated MVP and business model, and a thorough market analysis showing great potential for growth.

    Paying salaries to the founders is generally not the best way to use your limited resources. But you know your startup better than I do, so ultimately the decision is yours.

      • As long as you’re upfront with the investors where the money goes to, I don’t see a problem. Its their problem if they choose to spend their money this way.

        If the idea has been somewhat validated (ie. you have domain knowledge to know its legit), then it seems like a reasonable investment risk.

        If the idea is a pie in the sky, well they might just be the third F when it comes to raising your first round of funding… Friends, Family and…

  • Nothing wrong if money is used to pay very modest personal costs (ie just to cover your living expenses) and to develop product. If no money needed is actually for product, then you should both work a couple more months, save some money, then quit and live on savings while building.

  • I faced this problem myself. I paid myself money and quit my job. And then my startup floundered and I started up my job again. I am currently back to working AND re-building my startup.

    By the way, I typically shy away from business methodology books, thinking most of them are written by self-promoting blowhards. But if you have not read The Lean Startup, I need to STRONGLY recommend you do. It will change your entire perspective about how you approach this. You’ll keep working at your job until you are extremely confident you have a product worth quitting your job over. Go to youtube and search lean startup google and you’ll get the 58 video of Eric Ries (the author of Lean Startup) speaking to a group at Google. It’s a great introduction to the concept that will inspire you to invest the time to read the book.

    And I swear to God I don’t work for anyone in any way affiliated. I just know it’s completely changed my POV and has inspired me to keep working at both my daytime job and my dream at the same time until I find the sweet spot.

    Good luck!

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