The 3F’s Friends Family Fools are considered as the first source of funding for a startup
As an entrepreneur, you will be knowing that Investors invest in people, before investing in your business idea or Product. Since they don’t know you at all when you go to them first asking for funding.
They will be interested in whether the people( Friends & Family) who know you believe in you or not. They believe in your idea to give you seed funding for making it into business.
You see most Entrepreneurs have learned that it’s a lot easier to get money from friends and family rather than accelerators & Incubators, Angel investors and Venture capitalists (VC), etc.
The 3Fs i.e. Friends, Family, Fools are the vital human resources for business idea development towards a successful business.
After you validate your business idea based on uniqueness, feasibility, competition weaknesses, you decide to accumulate resources by first sharing your idea with others.
Let us discuss how Friends, Families, and Fools (The 3F’s) play their role in your business idea development -:
In the case of family, a person first informs about their Business idea with their parents. They expect to get help sooner from them with fewer questions as parents are bound to help their children.
But one needs to consider risk appetite and thinking of their parents. If they are job-oriented and like to live in their comfort zone, there is very little expectation to get help from them.
However, they can provide very little help in terms of money but will be insufficient. Second, the personal approach to other family members like their siblings and other relatives.
The situation becomes a little tough here as compared to parents because you not only need to describe your idea but also to mention the direct/indirect benefits which you will provide them in the future.
After getting suitable but insufficient help from family, you will approach friends. How they will contribute?
The possibility of help and expectations from friends fluctuates very much. This is because these possibilities depend upon the depth of friendship, direct/indirect benefits, and proper explanation of the business ideas.
In case if your friendship is of high depth, then higher is the chance that such a friend can be your resource. In some cases, you don’t even need to mention direct/indirect benefits, they can unreasonably support you.
Another case is that, if the depth of friendship is relatively less than the previous case, then such friends can start making unnecessary excuses instead of giving direct rejection to help you. Beware of such friends as they cannot be trustworthy and will create problems for you and your startup in the future.
In the final case where friendship is shallow, describing the business idea will not be sufficient, you need to explain direct/indirect benefits to them. Further, they possess betrayal.
Now, after getting all possible help from friends, sometimes you need further resources. Then you approach towards fools -:
They are unpredictable in terms of considering them as a factor to provide help and expectations. You need to keep direct/indirect benefits of your business idea especially in terms of money as a top priority rather than a business idea explanation.
You can least expect fools to retain with you. This is because of a lack of trustworthiness in the beginning. Because if fools start discussing their activities with their friends and get alerted, they can leave you in an instant without even informing you, that’s why they are dangerous.
From fools, short-term help like technical, financial assistance is tolerable by keeping idea security at the highest level.
Therefore, all the above 3 factors provide very important contributions in terms of guidance, money, technicalities, etc. only when help is taken with the right methods cautiously.
What gets you funding from Friends Family and Fools
- Reaching out to people when you need money instead of waiting for someone you know to offer you money
- Involving the 3 F’s whenever required in your Startup discussion and respecting them as Investors.
- Show your commitment and dedication to your idea.
- Keep them posted with the Idea progress and Product development.
- Ask for the only optimum financial support that will be critical for the Idea Development.
- While accepting money from friends and family, You should also convey the risks and expected return Timeline as they might not afford to lose it.
- Business idea development is an iterative process so start the development and then try to make it perfect with the iteration.
- Don’t be dependent on 3F’s only. reach out to other investors whenever needed.
- Network. Always remember, “It’s not who you know, It’s who knows you.”
If you want to be successful, find someone who has achieved the results you want and copy what they do and you’ll achieve the same results.- Tony Robbins
Many entrepreneurs also see this as Love money vs Smart Money which comes with their own advantages and disadvantage which differs from person to person.
In the case of love money, you will be getting money easily, with less profit sharing and with less documentation but at the same time, it may lead to relationships with suffering, Conflict of interest in the future on money repayment, high expectations, etc.
It may lead to obstacles to your startup journey in long term. Hence you should be following the step mentioned above to avoid such kinds of instances. In order to be successful in 3F’s funding, You need to be careful, clear, and supervise the whole process.
Once your startups start running successfully and you are in need of an expansion, You can always reach out the other investors, incubators for the funding and it will be easy for them to believe in you as they can see the people who know you have already believed in you and your idea.