Finance Fridays! Hard Truths: FFF or GTFO

By | March 15, 2019

At about the same time American school children are taught to believe in Santa Clause, they are instructed that “anyone can become President.” The parable accompanying both fantasies is; be good/work hard and be rewarded with what you ask for. Eventually children learn, despite their indoctrination, that the former is a lie as is the latter. As deeply dyed in the Rockwellian canvas is the myth of the self-made man. The parable is the same; be good/work hard and be rewarded. Yet while the other fables don’t survive puberty, the self-made man myth persists into adulthood. Why? Is it because those who have made it need to perpetuate the falsehood, inflating their self-worth by denying their privilege? Do we hope it becomes a self-fulfilling prophecy through its inspirational message? Success by way of the placebo effect? Or do we need to believe that America is a meritocracy for the sake of our own psyches? Otherwise it would mean that the American Dream isn’t obtainable by all. But Like short people aspiring to play basketball and astrologers trying to win the lottery, there are hard truths between the dreamer and the dream. For entrepreneurs that hard truth is: FFF or GTFO.

GTFO you know. FFF stands for Friends, Family, and Founders (or Fools, depending on who you ask). I recently meet with the Project Manager of a large local investment company and he confirmed for me my darkest fears; institutional investors typically won’t look your way unless you’ve received angel investment. Angel investors won’t give you a second look unless you’ve received FFF funding. And if you don’t have FFFs willing to invest, you’re shit out of luck.

There’s several reasons that FFFs form the foundation of reliable start-ups; some are financial, some are social. Here are just some of the reasons investors look at FFF investment as validating a start-up.

    • The More Financial Backing the Better:

    Conventional wisdom says that a company with more resources is in a better position than a company with less. Angels don’t want to do all the heavy lifting.

    • You’re Indebtedness Has Consequences:

    A company that fails honestly owes nothing to its investors, financially or legally. If the founders are indebted to their FFFs, however, there are social repercussions that they can’t just walk away from. The stakes are higher. For subsequent investors, such assurance is much better than no insurance.

    • Who Knows You Better Than Your Mom:

    And if your own mom won’t invest in you, what the hell’s wrong with you? Successful investors (old, white, and male) most likely had their own familial support network. With their worldview thus perverted by privilege, they’ll assume a functioning nuclear family is a given. And if your own family won’t invest in you, there’s something wrong with you.

    The reasons people give aren’t always reasonable. But the people in power make the rules, and the hard and fast rule for investors is FFF or GTFO.

    The view from the Larkin Bldg.

    In an upcoming post I’ll cover the alternatives of crowdfunding and grants (and why those are even less apt to work for you if you’ve no FFFs).

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