Using friends to invest

I have developed a website idea but have no funds to get it started. I have told friends close to me about my idea and they love it..some have even offered to invest in the company. Im thinking I would need about 40k to build a website and do some market data research just to get started. I have already aproached major companies that are essential to the sucess of my site and they had interest but would like to see more proof that the site would work. I figured I would just build the site and provide results from the market research done. What should I offer as far as price of shares and what % of shares of the company should I offer?

Sounds like you're on the right track. Some other things to think of as well: Are you planning to outsource the construction of the website or hire someone? How to promote the prototype to build users that validate the idea?

Fred Wilson, notable investor, wrote a blog earlier this year on Financing Options: Friends and Family

I'd suggest a cap that gives the friends and family around 10% of the
business if things work out. But that is just a suggestion. A 10%
interest will not be appropriate for every friends and family
investment.

Be sure to check out the comments as well. Most that partake in the comment thread are experienced entrepreneurs.