How does an entrepreneur raise a "friends and family" round?
Editor's note: We've all heard about a "Friends and family" round. But how does one actually go about asking for money? Yes. all of us will have different ways but in some cases, the situation might be tricky. Do you promise a return? Is it a loan? How does it work. A lot depends on your equation with your "Friends and family" but we have an instance to showcase here. Fixnix is a bootstrapped startup in the security domain and is currently looking to raise a round to scale up without giving up too much equity. Go through it and do share your experiences.
--dont consider this as "General solicitation"-- this is called purported information leak about our secret fund raising effort ;-)
---------- Forwarded message ----------
From: SHANMUGAVEL SANKARAN
Date: Fri, Sep 5, 2014 at 4:37 PM
Subject: Want 2 join hands ?
Dear Senthilkumar Manickam,
You have been seeing me in action from childhood and seen all my ups and downs in BigDumpCompanies.
Final crazy jumping ship before 2 years into entrepreneurship.
We're looking at raising 15,000$ {~ 15Lakhs INR} investment from you & our friends to start participating in this friends & family round. Will be able to consider this against convertible debt with 20% discount.
Twice we were sent feelers by our compete and partners for acquisition,
Once got a term sheet for a merger & even an acqui-hire offer from one Fortune 100 company.
In all these cases, we were evaluated at more than 10Cr for the sake of identifying the right billion $ problem, building the right prototype, raising the eyeballs about us, get right guineapigs to try our ideas. ;-)
Always engaging voluntarily approaching serious international VCs who're seeking updates about our traction so that they can participate with their global venture partner heads buy-in.
We need this bridge capital till we raise add-on advances from the Indian Bank to continue bootstrap or institutional fund from VC. Guestimating that it's going to take atleast 3 to 6 months minimum for this to happen. Even we're figuring out ramping up things by CUSTOMER FUNDING as like our role model ZOHO by working closely with HP, Cipla, EY, Hexaware and GMR.
Few of my entrepreneur friends has advised me to do personal reach out and NOT try this not so grt way of mail 2 seek help from you or anybody.
Want to pretend that I'm running out of time, so busy that I don't have option of personal 1:1 reach out. { You know the fact, I'm an introvert and dont talk abt financials while speaking in person or phone.}
It's the first time we're reaching out to the world. Would love to use a kickstarter tool, but we've grown little more than seed round types as we've infused more than 1Cr debt + other personal funds achieving this traction.
Let's believe putting together you, our friends & family are helping us with 250,000$ {1.5 Cr} under convertible debt-20% discount.
To scale & fuel the marketing of existing products, development of new products further, we're talking to good angels, VCs in the faith of raising fund in nearby quarters.
If we're able to do a Series A round from a reputed VC – $2M investment at $5M post-money valuation, all of you will have 6% of the company and VC will acquire 40% of the company and we'll be left with 56% for the founders and employees after VC funding of $2M.
Indian Math about returns
1.5Cr of Friends & Family convertible debt @ 20% discount
Series A –of $2M (12Cr) investment at $5M (30.2Cr) post-money valuation
If you're keen about knowing the company's past financials, past performance of the company before signing up, will set up call with our Co-Nixer Finance Rajkumar Selvaraju and coordinate the same.
Will walk you through the developed products, sales funnel and acquisition/merger interest.
Thanks,
Shanmugavel Sankaran
Chief Nixer, FixNix Inc.
http://FixNix.co
The letter has been reproduced from FixNix's website. Do drop in a comment with your views.