Why you shouldn’t raise a ‘friends and family’ round

Modern startup culture has painted a cliched image of the founder’s journey. It often starts with young friends who have some mix-and-match of the classic tropes:

• Dropping out of college.

• Taking crazy risks with their personal finances to get stuff off the ground (tons of credit card debt, selling their car, whatever).

• Working in some wholly inappropriate location (and sleeping there if you’re really hardcore).

• Being endlessely rejected by early investors and instead scraping together cash from uncles, cousins, parents…anyone you can.

We idolize these stories because everyone loves an underdog; the eventual success is all the sweeter for the tough times, the doubts and all the people who said you couldn’t.

But there’s a problem with these stories. The problem is, the majority are cherry-picked PR bullshit.

The truth is that most successful founders come from positions of considerable privilige, hence the over-representation of middle class white men, and the risks taken were not as great as they may be advertised.

For example, Bill Gates, Zuckerberg and Spiegel may have all dropped out of university but they were also all from comfortable/safe backgrounds, at elite universities and left at a point where their businesses had meaningful traction.

In each case, I’d quite confidently say they would have still been more than fine even if their venture failed.

My concern with these half-truths is that they have seeped so much into the romanticized picture of startup culture that they can lead real founders to believe that’s its not just OK but expected that they behave recklessly.

This is stupid. Your job as an entrepreneur is to take calculated risks, not as much risk as possible.

Most of the points in my earlier list could probably merit an individual article (here’s my co-founders on when to quit your job), but my focus in this article is that last example from my earlier list — raising your first round from friends and family (f&f). It’s my view that, in so far as it is reasonably possible, you should avoid this funding step and I outline my reasons below.