We made so many changes to the plan it confused everyone, including ourselves and our strongest supporters

We wrote our business plan for the seed round from friends and family. We sent it out to five people for feedback. We received some great feedback and modified the plan. We didn’t change much of the strategy but we made a lot of changes to the financial model.

We revised the plan and sent it to three more people for review. We got more input and didn’t know what to do when the changes suggested contradicted one another. We ended up using changes and ideas from the people we thought would invest in us. We went through this process four times and ended with a business plan, which differed from the original in many important ways.

The round was schedule to close at the end of the month so we contacted everyone we thought would be interested in investing. A number of people who had reviewed the plan along the way asked for the latest up date. They all responded that the plan didn’t make much sense anymore and they wouldn’t invest. One person asked if it was our plan or the seed investors.

We weren’t able to raise the seed round from our friends and family. We ended up alienating many of the people who were our strongest supporters. We had confused everyone including ourselves.

My father-in-law didn't understand the terms of the friends and family round and isn't speaking to me anymore

My father-in-law lent us $25K of the family and friends round. He didn’t really take any interest in the company and didn’t know very much about business. Whenever he came to the house he would ask when we would repay him.

To help the business grow we decided to ask debt-holders to covert their debt to equity. Everyone agreed except my father-in-law, even through the conversion terms were very favorable.

He came to the house and in the middle of dinner he told my wife that I was trying to screw him out of his money. He said I didn’t want to pay him back and that I was trying to steal his money. I tried to explain it to him again but he refused to listen. My wife was in tears. My father-in-law called me a greedy bastard and said he was hiring a lawyer.

His lawyer explained the situation to him – this enraged him even more. He now refuses to talk to me and my wife.

The second round valuation was lower than the seed round and my parents and friends were upset they lost money

The first round of seed capital for my business came from my parents and friends. It valued the company at $1m, which everyone was happy with. It quickly became obvious that we would need more cash within six months if we continued to grow at the same pace.

We met with Capital Ventures, who seemed interested in investing. We had several meetings and they asked for lots of information. After 8 weeks they said they would invest subject to the approval of their investment committee.

We did not hear back from them for a month. I called them and they said the meeting was postponed but they would get it to the committee within two weeks. Ten weeks passed and cash was getting low - we had less than 3 months left – when we heard that the investment committee had approved the investment and they would let us know the terms once they finished the due diligence. That took four more weeks and we only had a month of cash left.

They came to our office and said they wanted to buy 45% of the company at a $650K valuation and if we met certain benchmarks, they’d buy another 20% at the same valuation.

It was a disappointing offer, but we were out of cash and had to accept the offer. My parents and friends were very upset that they had lost money investing in me.