Raising money to get your brand new venture of the ground can be daunting. The Three F's is one way to do it - i.e. raise money from Friends, Family and Fools.

 

Do fools really invest in new companies? No, not really. To be fair there are lots of foolish investments made but the foolishness only tends to come to light after the event - the investor is seldom foolish. Perhaps "over keen" but seldom foolish. Tax drives the structure of a lot of investment deals as a properly structured investment can offer relief to those in high tax brackets - that doesn't make the investment foolish, though it can cloud judgement.

 

Should I get friends to invest? Depends... normally I would say no. A friend is someone who should be able to offer advice when your in a tight spot - if their money is in the same spot then they might be less objective than you would like. However, a friend with good business and previous investment experience should be a good investor.

 

Are mum and dad a good source of funding? Same as with friends investing really though more so. Don't blow ma and pa's retirement fund - it's been a long time in the creation. But again if it is coming with sound business experience and is far from being the life savings then it's worth thinking about.

 

3 F's - worth a thought, but don't treat Family and Friends as Fools.