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WHEN IN NEED, AN ACADEMIC scientist could turn to a government agency, a giant pharmaceutical company, some nonprofit with very deep pockets, or a friend. A friend indeed, you might say. In fact, many university scientists seeking to commercialize their research results turn to friends and family for startup funding. Upwards of one-quarter of the companies started by professors in fiscal year 2004 received initial funding from pals, parents, and other relatives according to Northbrook, Ill.-based Association of University Technology Managers (AUTM). In fact, those generous friends and family ponied up nearly half of the money that those companies received, and most of the remainder came from institutions. "Far from marauding bands of venture capitalists sweeping in and reaping profits from the back of federal research, these data show that most startup funding comes from friends, family, and other individual investors," says Ashley Stevens, AUTM survey editor and director of Boston University's Office of Technology Transfer.

Sharing history or bloodlines also leads individuals to make serious investments. Friends and families typically invest $10,000-20,000 per person in new ventures with usually less than $50,000 collected in all, says Jeffrey E. Sohl, director of the Center for Venture Research at the University of New Hampshire, Durham. These early investments are often in shares of common stock, which friends and family members hope will appreciate in value if and when the company becomes successful and is acquired or goes public.

If things go wrong, though, a friend indeed could turn, well, angry. Keep in mind - before accepting your mother's lifesavings - that startups do not necessarily stay up. "Friends and family - we actually call them friends, family, and fools - may be enamored with the idea of being investors, but they may not have the skill or knowledge to perform due diligence to assess risks," warns Sohl. "They may not understand the odds are high that they will never see a return on their investment." Tracking success rates of startup companies is difficult because they frequently change names, are acquired or sold, or go dormant, Sohl says. Of the 3,226 university startup companies in existence in 2004, however, only 124 went defunct, according to AUTM. When this happens, says Stevens, "It can make for some very strained Thanksgiving dinners."