One of my friends told me this week that he’s planning to create a startup with his first cousin, who he’s very close with. Personally, I think that is a little too close for comfort, and I don’t think I would enter into a venture with a family member (or even close friend for that matter). Would you steer clear of this arrangement? Or is the fear around this overstated? Have you heard any horror stories?
Best example of the worst case scenario, please see: Arrested Development (Television).
In my opinion, you need to have a really good personal relationship before you can have a working relationship. My husband and I have a great personal relationship and therefore it was easy for us to work together. When my father-in-law asked me to be a business partner for his company, I turned it down because our personal relationship is not good at all. You need to be able to work through problems as co-workers and if you can't do that at home, you probably can't at work either.
Agree with Brent; Keep emotion out of business. Never do business with family members. They can be passive member of the company.
I certainly am not the expert here but I think it is the wrong question. The question should be: Is this the right person to go into business with? And the follow up questions are: Will they add a skill/expertise/competency that I do not possess? Do we have the same goals? Do we have the same work ethic? Are we able to maturely discuss issues and address problems together? Will we still love each other after we have the big blow outs? Can I trust this person? Then, make sure, before you start, that there is a strong exit agreement/understanding should things go wrong.
Never hire anybody you can't fire without emotion.
Just trying to understand, if the question is - "Would you bring a family member as a co-founder". I would say yes. However, have clear understanding on roles, responsibilities, contributions, and even exits discussed upfront.
If that question was for an employee, unless both have maturity to set aside the emotional connect, it would be tough to handle day to day.
There are two perspectives which go against doing business with family members.
one as already stated is that you need to be able to fire that person if necessary or have very direct talks if things / performance is not as expected. With family members this is difficult coz you don't want to offend them and they believe they should not be treated like any other employee coz they are your family member.
So this might make your business live difficult.
then imagine you actually have to fire a family member, or have to take his responsibilities away. This could cause serious tensions within the family and will make your family live difficult.
So at least the bar on doing something with family members should be very high: are the skills of the people so unique and high in demand that it might make sense to do it but then be very open from the beginning, set expectations / requirements.
So if possible avoid it but if you have to then make it strict and clear.
Perhaps the critical question is if the person is qualified or not ? I find very often entrepreneurs trading competence for trust at a loss. A very good exit contract could also make things easier in case things don't work out