Sunday, March 11, 2007

Raising Money from Family and Friends

I was talking the other day with an entrepreneurial couple whose business is totally underfunded. They're wondering why their product isn’t selling, and it’s because they don't have the cash to market it properly.

They say that if they need money, they have lots of obliging friends and colleagues and family members who could help them. My question: why wait? Too many entrepreneurs bite off too much too soon. Most should either hold off until they have more resources, or they should raise the money they need first – usually from friends and family.

The sad part is, there aren’t many resources available to help entrepreneurs understand how to raise “love money.” It’s a tricky step whose implications will affect the business for years to come, so it’s important to get it right. Yet there’s not a lot of good information on this topic.

So here’s good news. Suzie Dingwall Williams, a Toronto lawyer who runs Venture Law Associates, is holding a special seminar April 11 to help entrepreneurs deal with the minefield that is early-stage financing. She calls it “Friends, Family and Angels: How to Prepare and Close the Deal (and keep them happy)”

Attendees will learn how to structure, paper and complete an investment from friends, family and angels. You’ll also learn the principles for valuing an investment. The two-hour session in downtown Toronto will also cover special issues such as receiving investments from U.S. relatives, deal "sweeteners", and RRSP eligibility. And if I know Suzie, who's very funny and irreverent, she'll make the whole thing fun and engaging.

Suzie, whom I wrote about in a column in January in the Financial Post, is an experienced corporate lawyer and venture capitalist who could be earning much more in the corporate world, but really enjoys helping entrepreneurs find growth financing. She tells me in an email that she’s putting on the seminar because, she says, “We spend FAR too much time dealing with legal issues that result from founders doing paperwork without advice (or, in a lot of cases, deciding to forego paperwork altogether). We figure, if we give people the basics, we're doing some good.”

For registration details email:

Meanwhile, if you want more information on love money, check out this article: "What’s Love Got to do with it?” It’s one of the few magazine features I’ve seen on how entrepreneurs raise money from family and friends. It ran in the February issue of Essential Guide for Entrepreneurs, which is a monthly supplement produced by The Year of the Canadian Entrepreneur consortium (Roynat, Rogers, National Post and PROFIT/Canadian Business magazines).

It’s an easy-to-read introduction to the world of family financing, if I do say so myself. (No, I didn't write it. I just edited the issue.)

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