I've had mostly good experiences doing this across two startups. The biggest challenge I've seen is the awkwardness around people who have previously been peers

I've had mostly good experiences doing this across two startups. The biggest challenge I've seen is the awkwardness around people who have previously been peers now being stacked in a hierarchy. The best way I've found to get around this is to think about your career as a long road where roles can change e.g. "You're working for me now, but next time I may be working for you". I had a former manager and friend work for me, and there are definitely friends I would work for in a heartbeat in the future. It will also probably be hard for your friend to deliver tough feedback to you, so you may have to work extra hard to solicit real feedback.