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.
Gust Launch can set your startup right so its investment ready.
This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.