I have more (semi)passive income then I need for living, and still work (30 hours in average per month, 2012) on projects that I consider fun, earning even more. I've been self employed most of my lifetime, while most of my friends are long term unemployed, or try to make a living with short precarious works. I agree to them that most jobs are shit, and encourage them to step out of the treadmill, helping them with their problems with unemployment office and the like.
Every few years, one of my friends has a business idea to become self employed, and if I think that the idea has value, I invest in them. e.g. I helped a friend to buy tools and machinery to become a self employed ship builder, and bought washing machines, desks, computers for an other friend to launch an self service laundry + internet coffee shop. I also help them in keeping the books, and filing taxes. I wrote my first accounting system at age of 13, so I know what I'm doing.
My investment terms are likely the most unusual you ever encountered: I take no interest, and they are free to pay back any amount any time they want. But if they do not manage to pay back at the time my birthday is dividable by 7, then I fold all debts. The same terms applies, if I help a friend with money for bail, or tenancy deposit, and the like.
I really enjoy my frugal lifestyle. I have no use for more money, besides gifting/investing it in real life friends that no bank or normal investor would even touch.
I'd say you qualify as an extremely eccentric investor. Most "fool" investors would never say "I have no use for more money", or be willing to write off their investment based on arbitrary criteria like their birthday being divisible by 7! :-)
Just because someone else wrote it down at some point in the past, doesn't mean it wasn't an arbitrary decision on their part. Arbitrary doesn't mean "senseless", though. There are good economic justifications for the concept of a Jubilee; just no precise reason to have one over any given period or another.
Friends and Family investments are like the reverse of a convertible note. If everything goes well, they remain an expensive, low-valuation share investment. If things go badly, they turn into a loan securitised by that most valuable of assets: your personal relationships.
That's all there is to it really. Hang it on your wall. Tape it to your monitor. I'm here to tell you. Don't. Do. It.
I'd have no trouble taking money from friends who have been around the startup block a couple times. These people don't need me to protect them from themselves. Asking directly seems tacky, but they'd know I was looking (some I'd be going to for help finding investors!), and if they expressed interest, that'd be fine.
Family I'm more iffy on, but that may only be because I don't really have a bunch of relatives who are both financially secure enough and sophisticated enough to understand what they're doing. In fact, I can only think of an aunt and uncle who I might consider taking money from, but even that I'm not so sure about.
It's really about whether they fundamentally grasp business, investment, and risk. And if they can't distinguish business and personal relationships, I don't think they're sophisticated enough to be investing in a startup to begin with.
I'd have no trouble taking money from friends who have been around the startup block a couple times. These people don't need me to protect them from themselves. Asking directly seems tacky, but they'd know I was looking (some I'd be going to for help finding investors!), and if they expressed interest, that'd be fine.
Those definitely fall into my latter category of "successful entrepreneurs". I agree that you can take investment from them - because they know what it's like to run a business!
> If you can't raise the investment you need from proper investors, and you find yourself thinking of resorting to FFFs, I suggest you instead consider the idea to be out of your reach. It's better to work on another idea than to end up with the sort of nightmarish scenario that is all too common near the end of an FFF-funded startup.
This implies that there is a startup idea the person could be working on instead which would be within their reach.
For most startups--or at least YC's pure-software "we did it for $10 on AWS" startups--the "getting off the ground" money from the FFF round is pretty much to cover your cost of living during the time you're building and launching and gaining traction. So, I don't see how picking a different idea decreases your cost of living...?
This implies that there is a startup idea the person could be working on instead which would be within their reach.
There always is. If you think there isn't, you need to learn to hustle. Not every business idea has to involve 18 months of dev time before you see any revenues. I'd argue that if you can't cover your cost of living yourself, then you definitely shouldn't be doing the kind of startup that doesn't generate revenues from day one.
If you can't already cover your own living expenses for a while, go work for a decent salary for a year or two. You're probably early in your career, so you'll get valuable experience, and if you're single and frugal, should have more than enough in a savings account at the end to live for 3-6 months. And you can spend some nights and weekends developing your idea while you're at it[1].
[1] Well, assuming California. Other places there may be issues with moonlighting. Make sure you know local laws and read what you signed when you were hired.
Im willing to bet that if you are going to do a statistical breakdown on most successful companies investment money has has directly or indirectly (ie through connections) family money,with friends or personal connections a close second. While would largely agree with Daniel on the downside of the three Fs there are upsides too. You dont waste 6 months pitching at the most critical time of your business startup,you dont get screwed by information asymmetry dealing with experienced investors and most importantly you actually get the money rather than "we will call you back".
I have more (semi)passive income then I need for living, and still work (30 hours in average per month, 2012) on projects that I consider fun, earning even more. I've been self employed most of my lifetime, while most of my friends are long term unemployed, or try to make a living with short precarious works. I agree to them that most jobs are shit, and encourage them to step out of the treadmill, helping them with their problems with unemployment office and the like.
Every few years, one of my friends has a business idea to become self employed, and if I think that the idea has value, I invest in them. e.g. I helped a friend to buy tools and machinery to become a self employed ship builder, and bought washing machines, desks, computers for an other friend to launch an self service laundry + internet coffee shop. I also help them in keeping the books, and filing taxes. I wrote my first accounting system at age of 13, so I know what I'm doing.
My investment terms are likely the most unusual you ever encountered: I take no interest, and they are free to pay back any amount any time they want. But if they do not manage to pay back at the time my birthday is dividable by 7, then I fold all debts. The same terms applies, if I help a friend with money for bail, or tenancy deposit, and the like.
I really enjoy my frugal lifestyle. I have no use for more money, besides gifting/investing it in real life friends that no bank or normal investor would even touch.