It always is.
The trouble is that what's safest for your parents' money and what's best for the company you are trying to build may be incompatible. And the effects of that clash can't be escaped. Take your parents' money, and you accept their involvement to whatever degree they impose it. Even if they merely toss you the money and walk off, you'll be left holding the guilt -- which sounds perfectly manageable until you add it to the other strains of growing a start-up.
But what's worse than such emotional baggage is actual interference, either indirectly or directly. Most parental lenders, for perfectly legitimate reasons, will want to pull strings. Many will want to be there.
Interference in Absentia
Some parents try hard. They really do. Few could be as aware of the risks of lending money as psychologist Lucy Scott is. "A loan puts dollars on what is really an emotional issue, and makes it evident," she says. "Money is the language of power."
Her sensitivity to such struggles helped her minimize the difficulties when her daughter asked her for start-up money about four years ago. Scott was understanding, empathetic, and undemanding. The result: she merely crippled her daughter's ability to manage, undercut her self-confidence, and curtailed some of the enjoyment she might have gotten out of starting Primal Lite Inc., in Berk-eley, Calif. "Growth is really about jumping off a cliff," says Sue Scott. "But for me, every decision weighed heavily. I had this sense that my mother's money should be very protected."
Dismissed by bankers and shunned by venture capital groups, Sue approached her mother feeling "quite beat up." She simply laid out her woes, hoping her mother would follow them to the inevitable conclusion. It worked. "I want this to work for you," Lucy responded. "What do you need?" Came her daughter's tentative reply: "Do you think, possibly, $5,000?" That was in August 1986. By January 1987 they had played the scene eight more times; Sue had dipped into her mother's savings for a total of $45,000. "I was quite willing to give it," says Lucy. "There are trade-offs and risks; I'm concerned in a realistic way that I will need that money to support myself in my old age. But to not give her the support she needed when she needed it, that would be impossible to live with." The Scotts didn't bother committing the loan to paper. "I felt she was doing her business in a very solid way," says Lucy. "What more can you ask of someone?"
But parental interference needn't be direct to be damaging. "My mother was in my mind all the time," says Sue. Often she found herself wavering, wondering whether her mother would approve of something but feeling that she ought to make the decision on her own. Early on she wanted to hire a publicist because she felt customers needed to be educated about the company's products, strings of decorative lights in the shapes of animals and objects. "For a company of no size," she imagined her mother saying, "do you really need a publicist?" Though Sue went ahead with it, she says, "I perhaps took a little longer than I might have otherwise."
As Sue saw it, Lucy's loan entitled her mother to an explanation of every move -- from her justification for visiting suppliers in Taiwan to her hiring of a new production manager to the new computer system she installed. "I never asked for her approval, but she would pick up and send back innuendos," says Sue. "She was telling me it was OK." Still, the anxiety had a corrosive effect. "I was always terrified that she'd say, 'I want the money, and I want it now,' " says Sue.
The nature of her loan, Sue found, forced her to subject every decision to a nearly impossible test: Is this worth risking Mom's retirement? The Primal Party, for instance, is an annual bash for anyone associated with Primal Lite. Last year -- with the loan still outstanding -- Sue planned to entertain 300 people in the company's 5,000-square-foot warehouse. "I was very concerned that Mom would see the band coming and she'd think that money ought to be going into her pocket," says Sue. "Guilt was running amok in my mind." The band, nevertheless, played on. Mom was there. "If she didn't worry about it at all, then I would be worried," confirms Lucy.
Given the sacrifices she imagined her mother making, Sue felt she'd better suffer too. "I would have allowed myself more living expenses had the money come from a bank," she says. Flying to Tucson to visit friends, she fretted, "I ought to be writing a check for $200 to my mother instead." New clothes, a home -- they got deferred in the bargain as well. There was no escaping her debt to her mother; at family gatherings, someone might ask Lucy about investing in a real estate deal, and Sue would wonder whether funding Primal had robbed her mother of other -- wiser -- opportunities. "I'd run back to the company, examine spreadsheets, and stay up all night worrying," says Sue. And when she reports her company's revenues -- $2 million this year -- she does so apologetically. "I know Mom is thinking, When am I getting my money?" says Sue. "I have to explain why I don't have it to pay back. She'll say, 'Yeah, Sue, right.' Then she'll change the subject."
Primal recently obtained a $100,000 line of credit, and Sue has begun paying her mother back. "It makes me feel like an adult," says 36-year-old Sue. She kicked off her payments last December by surreptitiously slipping a $1,000 bill inside a Christmas card. "I thought, Gee, this is great, keep more of these coming," recalls Lucy. "I didn't expect it."
"But then," she adds, "I don't ever tell her what to do."
Interference by Proxy
It's absurd to suggest that all entrepreneurs who borrow money from their parents find themselves tormented by the voices in their heads. Not at all. That particular fate is reserved for the fortunate ones.
