Love money: how to do it?

Too Long Not to Read: What to Remember

• Choose the right people, they should respect your choices
• Investors should be warned of the risks involved
• Convince using the tax advantage argument
• Don’t call love money right away

Investors often do not have the same goals as the project promoters and this creates tensions. So it’s important to ask the right people and make things clear from the beginning. Just because someone close to you is investing in your project doesn’t mean they have the right to see your strategy and your choices.

To clarify this point, the entrepreneur can make an agreement with the shareholders. By establishing a clear hierarchy of decision makers for all parties, the agreement will allow you to frame the people who want to interfere less in your decisions. It is also recommended to specify the conditions of leaving the company in this non-mandatory document.

For entrepreneurs who do not have family or friends around them who can invest in their project, there are associations that connect entrepreneurs and private investors. The Cigales federation and the business network are part of it.

> Investors must agree to let you “manage their money”, they must not imagine being able to interfere with your strategy.

To convince potential investors, it is necessary to present the project to them. It is advisable to bet above all on the person, the composition of the team. At this stage people are not investing in the future service or product, but in you. So feel free, talk about yourself!

On the other hand, it’s about being as honest as possible, emphasizing the strengths, but also the weaknesses of your idea. By betting with you, your loved ones are at risk of losing money and so that it does not cause separations they should know this before putting their hand in their pocket.

To attract them, you can also tell them about the tax advantages reserved for individual investors. It is indeed possible, since the law of Dutreil in August 2003, to deduct from a person’s tax 22% of the investments placed in a company. A reduction, however, is limited to contributions of less than 20,000 euros for a single person and 40,000 euros for a couple. These ceilings can be increased to 50,000 and 100,000 euros if the company is less than five years old and has less than 50 employees.

It is not easy to convince. Through this step you can not only test your idea, validate your business model or change it accordingly and talk about your business, but the love of money also has a significant advantage in convincing banks. An entrepreneur who succeeded in building capital in this way attracted the attention of the bank’s infrastructure, which saw this as proof of the seriousness of the project.

> The tax benefits enjoyed by individual investors are good arguments

Usually the love money is used only for the seed stage of a startup, to develop it it is necessary to find additional funding elsewhere. However, it is easier to attract investors with undiluted capital. The phase of finding love money should not happen long before the collection phase, the goal is to present itself to future investors with the healthiest accounts possible.

It is important to properly express your money in love. Offering these investors convertible bonds or a redeemable share subscription warrant (BSAR) is a good idea. These loans can be paid in cash and therefore have the advantage of not being liquidated. A great way to show investors your ability to convince without setting a valuation too low.

> It is more relevant to ask for investment from relatives before organizing a fundraiser