I'm going to go against some of the other comments here say go for it. The dicey part is how much equity they get, do they get paid dividends, do they only get anything back if you sell, etc. I am curious to see what others say as far as options and advice go in that respect. My startup was in a similar situation (although it was a close friend who was investing, not a family member). Our situation was different, as…
I say "Go for it" too. Find a lawyer before promising anything, even if it is a close friend who doesn't mind doing things informally. I don't know of startup attorneys in the Bay Area, but plenty of people here should. (If you don't get any responses, I'd directly email 5-6 YC startups in the area and ask who they use.) Your attorney will probably want to do a few things: 1. Button up your legal structure and organi…
You don't necessarily need a 'startup attorney' or even one here in the Bay Area. If you're intending to raise a Series A in the next few months I'd try to get a relationship set up with a 'startup attorney' but otherwise you're just wasting your money. Go to somebody who knows corporate law, get an associate, and don't go with a big name firm. The stuff you want to do at this stage is likely very straightforward.
The best option for you at this point will be to do some sort of convertible note with a discount (of maybe 10-20% on your next round) or possibly a fixed cap (which is worse for you but better for the investor). This is good for two reasons; its simple, and it won't mess up your fundraising later on. You certainly should NOT give this investor control over anything (board seats, voting rights, etc.) the investment is far too small for any of that, and it WILL have an effect on your fundraising down the road.
I disagree with the previous commenter who says...
"If a better opportunity comes along in 6 weeks, you might not be able to jump on it because you now have a responsibility to your investor."
In reality the investor has no control over your actions, and also, if you find a better opportunity a good investor should be happy for you to jump on that idea. Assuming the idea really is better.