What is a "Friends and Family" Raise in Fundraising? Getting Your Business Off the Ground
Before approaching professional investors, many entrepreneurs turn to those who know and trust them most—their friends and family. A “friends and family” raise is often the very first step in fundraising for a new business, providing the initial capital to get started.
What is a Friends and Family Raise?
A friends and family raise is when you ask people in your personal network—like parents, siblings, friends, or close colleagues—to invest in your business. This round usually happens before any formal seed or venture capital investment and is often based more on personal trust than business metrics.
Simple Definition: A friends and family raise is early-stage funding from people who believe in you, not just your business idea.
Why Do Entrepreneurs Do a Friends and Family Round?
Early support: Most startups need some cash just to get started—before they’re ready for outside investors.
Builds momentum: Early funding helps you build a prototype, launch a website, or make your first sales.
Shows commitment: Investing your own network’s money demonstrates belief in your idea when pitching later investors.
How Much is Typically Raised?
Usually between $5,000 and $150,000 (but can vary widely).
The amount depends on your network, your needs, and your ability to inspire confidence.
How Does it Work?
Investment or loan: Funds can be structured as a loan (to be paid back) or as equity (ownership in your company).
Informal agreements: Often less formal than later rounds, but it’s still smart to put everything in writing.
Risks: Relationships can be affected if the business struggles—be transparent about risks!
Tips for a Successful Friends and Family Raise
Be honest about the risks (most startups fail!)
Put agreements in writing, even with close friends or relatives
Only accept what people can truly afford to lose
Treat these investors with the same respect as professional ones—regular updates and transparency
Alternatives to a Friends and Family Round
Bootstrapping (using your own savings)
Crowdfunding (raising small amounts from many supporters)
Small business grants or competitions
The Bottom Line
A friends and family raise can be a powerful way to get your business off the ground, but it comes with emotional and ethical responsibilities. Make good with your time by being transparent, respectful, and diligent—protect your relationships as fiercely as you pursue your dreams.