Friends and Family
Just like it sounds, raise money from people you know well, either in exchange for equity or as a loan to be repaid.
Upside
- This option has the fewest contractual strings attached, although you should still draw up a contract to protect your friend’s or family member’s investment.
- Funds are typically available quickly.
Downside
- This is usually a limited, one-time source of funding.
- You are spending your friend’s or family member’s money – so do so wisely, and be prepared to deal with the consequences if your business does not succeed.
Resource
To better manage loans between friends and family, Circlelending provides a full range of services for managing financial transactions between private parties.
Angel Investors
Angel investors are individuals who invest in companies at an early stage in exchange for equity and the chance to help guide the company. In contrast, venture capitalists invest as a profession and generally on behalf of other investors.
Generally one is ready to approach angels when they have exhausted their friends and family but are not yet ready to approach venture capitalists for money.