How to Raise Startup Seed Funding from Friends and Family, Instead of VCs

2. Seek accredited investors.

All of our investors had net worth of at least $1 million or a yearly salary of over $300k.

Accredited investors helped us in two ways. Since they were high net worth individuals, they could afford to lose their investment if we did not succeed, which helped us avoid the mistake of raising money from people who cannot afford to lose it.

Having accredited investors also meant less paperwork for us and our legal team because of laws that allow people with higher net worth to invest with fewer requirements.

3. Put your cards on the table.

We were upfront with potential investors.

While we were confident we were going to be successful, we told investors that the worst-case scenario involved the possibility of losing 100 percent of their investment. We also told them that they might not see a return on their investment for five or more years.

Our investors were comforted by knowing that we were being honest with them about all of the risks.

Don’t make promises you can’t keep just to get someone to open their checkbook. When you don’t fulfill a promise you made a few months down the road, your friends and family will not be happy.