Should I invest in a “cause/social marketing” business selling in a flooded market?
I would likely not invest in this myself, but…
if you like your friend, have the money readily available and wouldn’t mind terribly if you lost all of it, then you might want to consider a structure that lets you help your friend, but also tries to protect your downside a bit. For example, you could provide, say, $25K as a loan, and have him start to pay it back by giving you something like 5% of all gross sales, until you were fully repaid (which would be, in this example, after they had reached $500K in total sales). At that point your interest would convert to a small equity piece of common stock, so that you would benefit if the company became a big success.
original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
Written by David S. Rose
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