An Intimate affair

 Your decision to start up on your own is the culmination of several small decisions you take in the run-up. If you do not belong to a business family, the decision is usually based on your understanding of the market demand for the product or service you wish to take up. It also depends on the start-up team you build. People, who are passionate about the product or service, join your endeavor as they see an opportunity too. You pick them based on their relevant skills. We call it an intimate affair because there is a good chance that you may hire family members or relatives to the business based on your assessment of the skills needed. Having said that, there are pros and cons to every company structure, and there is no right or wrong here. This is because instead of viewing management structure in black and white, investors take a holistic view.

The Fundraising Myth 

You could have a smooth ride in the early stages. However, when the business grows and you look for outside investors, you could face questions about your hires. On the surface, it would seem that VCs who are hesitant about supporting family-run businesses are just being insightful. After all, there have been many high-profile divorces that got pretty messy, especially as they played out in the media. The last thing an investor needs is to have their investment tied up in alimony. But it is a myth! Such team structures are not a complete no-go. Despite the common advice of not mixing personal and professional lives, there are a plethora of husband-and-wife teams/father-son duos that are proving that it can be done and done well. See the likes of Sugar, Flipkart, MobiKwik, Chumbak, etc. in India. 

Two sides of the same coin

Funding talk aside, there can be several upsides to having family members in your startup. First, it is most likely that you and your family will have strong core values in common, and when you start a business together, those beliefs will help to support the vision, build the culture, and establish the essence of the company's identity. At the same time, who better to communicate with than your own family? Which is exactly what a business can use. This is a challenging one, too, because when conversations go wrong, things can go south very quickly. Along with strong communication ties, comes work culture. Building a business requires a lot of commitment in hard times and good times, which can be a great perk of starting a business with your family, as they are more likely to stick together in harsh situations and show the determination to accomplish the shared goals. Lastly, family members are more inclined to accept lesser pay than they would receive elsewhere. This is a great perk as it will benefit the company in the long run or during times of cash flow problems.

On the other hand, conflicts that originate in the workplace can easily carry over to your personal life, causing serious strife between family members. This can cause a lot of friction for the company, slow down progress, and necessitate uncomfortable conversations amongst the parties involved that, depending on the circumstances, may extend for weeks. When a member of your family is a business partner, it can be challenging to keep work and life discrete. In certain cases, family and professional responsibilities can overlap, creating an established line of command that, if altered or challenged, could result in power disputes. Therefore, it is important to understand that involving family in your startup can be a delicate balance between risks and rewards, which is why it requires proper consideration before taking the leap.

Keys to Family-Run Startup Success

First, there should be an agreement before getting started to separate roles and responsibilities. Meritocracy could take a backseat. Potential investors want you to hire the best people for all the jobs in your business. People you hire at the start are like multiple wheels on a car. They set the tone for your business strategy. If such people are family members, outside investors would evaluate each one with extra rigour for their skills, the value they bring to the table, and their past track record. 

Any outside investor would like you to steer clear of nepotism. Nobody should be entitled to a position in your business just because that person is related to you. Key positions in your company should have competent people with experience. 

Secondly, investors will also dive into the interpersonal relationships among family members. They would look for circumstances that led to them getting professional titles in the company. The key to success is understanding that change is constant in business. However, not everyone agrees with that.

Lastly, you may have a great idea, but success lies in the execution. If you put emotions ahead of logic or strategy, you will hit the ceiling sooner rather than later. If you need capital for growth, you will need skilled talent to help you use that capital well.

There is no data that empirically and overwhelmingly proves professionally managed businesses do better than family-run businesses. A lot of traditional business families work with professionals. It is your conduct as a company founder and the ground rules you set that determine the future because it is hard enough launching a company without the added pitfalls and potential baggage of family relationships. But its biggest advantage is that you have a dedicated pool of people ready to stand behind your effort.