In the world of venture-backed startups, very early stage capital raises for a startup often come from what are called “FFFs” – family members, friends and fools.
At a company lifecycle stage that is even before “pre-seed”, why do they invest? Possibly because they do not objectively assess the risk they are taking. Mostly, as a favour to help someone out.
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- Family? Makes sense. My parents helped with my businesses.
- Fools? I understand.
- Friends? Wow! What a friend! Or maybe not?
For wealthy people, friends occupy an ‘interesting’ space.
Sometimes, they are seeking “secondary fame” – being associated with someone famous and enjoying the parties and high life. While it might be nice to have an entourage, they are hangers-on rather than friends.
They might be looking for commercial gain – access to deals from someone who has the “Midas touch”. It might be quality deals they can’t access, and it might be a long-shot startup that will return either 100x or a doughnut.
Friendship can change as someone’s wealth changes. Jen Risher wrote about this poignantly in her excellent first-hand account We Need to Talk.
The fact is that people look at you differently when you are wealthy or have a public profile. They make assumptions (mostly wrong) and prejudge.
Being judged by people who don’t actually know you is awful at any time. This is amplified by the nature and reach of social media.
“So many parasocial relationships; so little time”.
Telling the difference between a friendship that is relational vs transactional is difficult.
The easiest way is to experience a crisis or loss of status, particularly a public one. Then you quickly find out who your real friends are, and fake ones are exposed for what they really are. Unfortunately, it’s probably the worst way to find out as well.
This is why peer networks are so valuable and sought after by the wealthy.
They can be safe spaces with people who are “like you” and who “get it”.
Places where you can talk about the genuine challenges in your life with others who recognise they are genuine challenges, despite financial abundance. First world problems are still problems.
This is also why people from wealthy families might prefer to date and marry people who are from similar financial circumstances.
While it might seem snobby, it’s actually prudent.
And as a wise person once said – paraphrasing Phil McGraw – “if you marry for money, that’s all you’ll get”.
Of course, filters like these are no guarantee. There are people who want something from you everywhere.
It’s not healthy to live in constant fear of this.
Over the years, I’ve met many fund managers, and that has helped me develop an ability to discern good ones, or at least filter out the dodgy ones.
What people call “gut instinct” is actually pattern-matching.
It’s an important skill for anyone to develop.
Conversation Starters:
Which of your friends would be there for you in a crisis?
What markers do you look for in friends?
If your financial circumstance has changed, how have friendships also changed?
Further Reading:
PHILIP MACKEOWN’S KEY FINDINGS FROM THE 18TH EUROPEAN FAMILIES IN BUSINESS FORUM
Loyalty is not a strategy: How family businesses get stuck with the wrong people
