Why Founders Stopped Raising Capital From Friends and Family

More founders replace raising capital from family and friends with the new operator-angel round to de-risk technical dependencies, accelerate time to launch and build momentum for the next round.

Building on last week’s discussion ‘how to become a VC’ with an open discussion below:

Replace raising venture capital from family with an operator-angel round

There are three goals of an operator-angel round.

1. Accelerate your startup’s time to market

Rather than focusing on family and friends capital raising, drive strategic alignment with core integration partners and founders/operators who can open doors quickly.

2. Augment your team’s current capabilities

Find operators who can immediately deliver a high value per dollar invested through a focused body of work and immediate access to network. To do this, skip raising capital from friends and family. Instead:

• Choose angels based on relevant operating experience
• Create goals and focused body of work to leverage an individual angel’s superpower
• Continue to build momentum with angel until your startup has enough momentum to hire someone full-time. Leverage angel’s peer network to source, vet and onboard someone full-time

3. Act on first mover advantage and engage high-signal angels

New entrants will be viewed as a fast follow with a low chance of becoming the category leader. How? 

• Build your sector-aligned CEO network to establish credibility with users & investors
• Leverage early investor alumni networks to scale hiring momentum & culture
• Box out competition with a bottom-up community of early believers and evangelists

Also check out:

• 5 Lessons from Tandem on Raising a $7.5 Million Seed Round
• 3 Ways to Activate Your Army of Investors
• Remote Work Tips: How I Spend My Time as a Solo Capitalist