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The Venture Adventure

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Money from Angels

You might have a parent with some cash on hand or maybe a rich aunt or uncle. Money from friends or relatives is, after all, money. During the early days of your startup, you might find someone close to you who is willing to invest a tidy sum in your startup. These types of investors, even certain individuals who you don't know personally but who have some money to loan to lucky and deserving companies, are often called Angels. That's an old Broadway term, and originally it meant a person who funded a Broadway show. Recently, it has taken on a different, but similar, meaning as it relates to start-up venture capital.

If that happens, you should take the effort to see an attorney and come up with some detailed, written agreement regarding precisely what your relative or friend is going to get as consideration for his money. Is it a bit of equity in your company, such as stock? Will he have any role in management? Or, is this merely a loan with a certain amount of interest, a schedule of payments, and other terms and conditions?

Whatever your agreement is, you should clearly document it in writing so that there are no hard feelings or misunderstandings later. After all, this might be your mother that we are talking about and you only have one mother.

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