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Seed: how to manage your love money?

When you start a start-up, the question of financing comes up very quickly. And you will quickly realize that the majority of seed funding is inaccessible if your company does not already have seed capital. This may seem surprising, but it’s quite simple: funders don’t consider that it’s up to them to assume the risk, but to you as well. So what do you do if you haven’t put aside some savings to finance the launch of your business and unlock additional funding? One of the most frequent solutions is to call on the famous “love money” (financing coming from the personal network of the entrepreneur: family, friends…). But how to manage this financing at the legal and accounting level? Three solutions are possible:

1. Personal loan

If the people who are ready to support you are really close and want to help you personally, they can give you a personal loan. You can then invest this amount in your business as equity. However, keep in mind that this type of commitment can lead to personal conflicts later on. The conditions must be very clear to all concerned, written down in black and white, so that you have a record for later if necessary. Remember to define (and respect) the terms of repayment and to check the formalities to be followed at tax level, especially for amounts over €5,000.

2. Investment against royalties

Another clever way to increase your equity by calling on your love money is to offer them to invest in exchange for royalties. In this case, they will be entitled to a predefined percentage of your company’s turnover, which you will sell for a set period. There are two main advantages to this solution: you only reimburse them according to the evolution of the turnover of the business, they are directly interested in the success of the business, without having to manage them in the capital. You can use private fundraising tools, which allow you to establish standard contracts and manage your investors in an automated way for very affordable rates.

3. BSA Air

A very fashionable financing method at the moment is the BSA Air or “share subscription warrant – rapid investment agreement”. The advantage: raising capital without having to determine the valuation of the company. In this case, your “love money” investors will only enter the capital when an external event occurs, such as a future fundraising. And it is at this moment that the valuation will be determined. On the other hand, this means that you will have to integrate these people into your capital in the long term and that they will have a say in your general meetings. And you will probably have to manage their exit at some point. Keep in mind that all this will take a considerable amount of time in negotiation and administrative management, even if the Air BSAs allow you to postpone it to later.


Conflicts between partners are a factor of failure of a start-up, so think carefully about the profiles of the people you will integrate into your capital and why. Today, there are enough non-dilutive solutions to allow you to reserve your capital only to people you want to integrate into the business because you share the same vision and you can bring value to each other. Also keep in mind to aim for a good balance between your equity (share capital), your other equity (royalties, AIR BSA) and quasi-equity (partner’s current account) in order to benefit from additional debt or subsidy financing if needed.


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