What's the worst part about startup funding from family?

I was just talking to someone about startup funding sources and the question came up, "What the worst thing about having startup funding from family members?"

The one word answer:  "Thanksgiving".

If you are going to take money cousin Bob or uncle Ignatius, treat them as you would any arms-length investor. In other words, paper the transaction in the same manner that you would paper an angel investor investment or loan.  This way all parties understand fully what they are getting themselves into.

Never rely on anyone (including yourself) to accurately remember what was agreed to. Even though you may be able to do so the other party might have heard something completely different.

That's why there's an old saying, "A verbal agreement isn't worth the paper it's written on."