You did mention already that you are a 'struggling startup' and it would be unwise to take your friend, who may add burden to the finances of your entrepreneurship.

You can't hire someone in the first place who does not know what he wants to do except get paid. What I would suggest is for you to simply help your friend realize where s/he is good at help him/her find work which would unlock that potential.

If hiring him does not make things better for both of you, then it would be best not to do it. Sometimes, doing the right thing may be a bit painful on the 'friendship' side of things.