Recently, in one of the LinkedIn Groups I belong to – Business Owners & Entrepreneurs – Sandra Brevett-Dib posted a link to an article on Forbes.com: ‘Early-Stage Startups Need Friends, Family, and Fools’ by Martin Zwilling.
I posted a comment that, when I talk about the 3Fs, I use the term Fanatics not Fools, because:
“I don’t like the term ‘fools’ when applied to people who are investing in your business – because to me it implies that your business is a foolish one to invest in. Fanatics are people who love your idea so passionately that they are willing to overlook some things that a ‘professional investor’ may see as dealbreakers.”
That inspired me to talk in more detail here about Fools vs. Fanatics.
So, obviously, my first problem is with the implications of the term ‘fools’.
The first implication is the one I referenced in my LinkedIn comment – that your business is a foolish one to invest in. I would hope that you have done enough planning and feasibility due diligence to know that your business is not a foolish one. After all, if your own due diligence showed that it is a foolish business, why are you pursuing it?
If it is the investor who is really the fool, then why is that?
Is it because you are keeping something from them, that if they knew about it they wouldn’t invest in your business – i.e., are you playing them for a fool? If this is the case then I would ask that you check your moral and ethical compass, because those sorts of values will eventually come back to bite you.
Or, is it because they are investing for all the wrong reasons – e.g., they’re expecting annual dividends almost immediately but this is a long term growth opportunity. If this is true, I would again ask you to look at why you believe it is OK to take money from this investor. Remember, all investor dollars are not good ones – especially if the investors expectations of a return are different from yours.
Another implication is that your Family and Friends who are investing in your business are ‘fools’, because they are lumped together in the 3Fs. But they aren’t. Your Family and Friends are probably investing in you and your passion more than your business idea – is this foolish? I believe not – is it any different than your parents helping out with the down-payment on your first house; or, paying for that expensive college education for you?
And that’s the point isn’t it – your Family and Friends are fanatical about helping you succeed (if they are not you probably aren’t approaching them for investment dollars [superemotions file=”icon_biggrin.gif” title=”Big Grin”]).
So, if someone is not your Friend or part of your Family, but is so passionate about your idea that they are willing to invest in your business without the detailed business model and financials that a professional investor requires, are they a ‘fool’? Or are they a Fanatic?
So which would you prefer as an early investor a ‘fool’ or a ‘fanatic’?