For my first, ill-fated startup, I took out a £5,000 loan to invest in the business. The point of that was to commit myself to the business and ensure that I kept working on it, even with the distractions of a full-time job.
Charlie O'Donnell thinks that financial "skin" is not motivating enough:
When you're a public figure as I've been, I'm pretty sure that anything I do comes with a lot of skin--because if it doesn't work out, that's going to be a tough blog post to write. Trust me that it was a lot tougher to tell people that my startup didn't work out than it was for me to setup a payment plan to eliminate the $30k in debt I accumulated doing it. That part was super easy... it was a spreadsheet. The blog post was about pride and telling people was about protecting relationships with the people who invested in me. That part was hard.
For me, the money worked. There were many times when I felt like throwing in the towel, but having put £5k into it, that was just not an option.
Right now, £5k wouldn't have the same effect - in part because I have more money, relatively, but also because I would never invest an extreme amount of money into a venture that's this likely to fail (yes, £5k was extreme for me at the time - I doubled my debt overnight).
But Charlie is right in his conclusion:
So before you think you have a catch-all general motivational tool like "skin" and you think that's going to be a motivator for success, get to know the person you're backing a little more. If you're doing a startup, money is pretty much the last motivator and it's probably the thing they least care about losing.
The other part of the story is that my cofounder did have money in the company too - but that was not enough to motivate him. This was one of the (many) reasons why the business didn't work out. Different people have different motivators. Make sure you figure out yours and your cofounders'.
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