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Before a meeting with formal investors such as Venture Capitalists and Angels, entrepreneurs fine tune their Elevator Pitch. But when startup owners want to gear their pitch towards family and friends, the Elevator Method become far too formal; instead, they utilize what is called the Kitchen Table Pitch.
Compared to an elevator pitch, the Kitchen Table Pitches adapts to the pre-established relationship with the potential investor. These informal pitches are geared towards informing family and friends of your business idea and if and when the discussion leads to investment, you need to be sure you protect your relationships. Here are a few tips for avoiding the pitfalls:
Loans are simpler than equity. With family and friends, it is often easier to ask for simple loans into the company rather than offering equity. To learn more about debt vs equity capital, read here. Try not to complicate the procedure by offering ownership and decision-making privileges because your friends and family are probably not involved in the industry you are working in. Rather, ask for a monetary loan.
Create a formal repayment plan. Be reasonable in the amount of money that you ask from family and friends and come prepared to offer them a structured repayment plan. Because your family and friends want you to succeed, they will tend to be more lenient than formal investors with your repayment plan timeline. But, that doesnt mean they dont deserve proper legalities. Dont ruin relationships by failing to stick to a feasible timeline where you pay back money, with interest.
Follow-Up. Keep your family and friends updated on the progress of your company this doesnt have to be a weekly chore, but rather try to do a follow-up once every 6 months. By showing that you stick to your word and your work, you will help to build confidence in your business as well as strengthen relationships for the future.
As is the case with any investor, be prepared to present your friends and family with a business plan that clearly outlines the product and service, the operational roadmap and the business opportunity.