The Parent Trap

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Usually parents who part with money -- especially in the amounts, and with the risks, that start-ups involve -- want more influence in how it is spent. That does not mean, necessarily, that your mother will harangue you about that copy machine you've leased (though she may) or that your dad will feel strongly about how much you are paying that new office manager (he probably will). They are parents; they can manipulate matters in a far subtler way.

Martin Schlossberg, for instance, wanted to use his money not just to help his son launch a business but also to bring his children closer together. His intentions were perfectly laudable; he wanted to see his son and daughter thriving in the same sort of business that had served him -- and two generations before him -- so well. "I thought it would be good for them," he says. No one stopped to consider, however, the possible effects his manipulation might have on managing the business, or the toll it could take on the people involved.

Martin offered his children, Peter and Lisa, the money to open a needlepoint-supplies store. The only condition was that they had to be partners. "I was surprised the money came with strings," recalls Peter. "My dad was having a good time putting the whole thing together."

Almost from the start Martin was the only one enjoying himself. "It wasn't clear who would do what," says Peter, then 28, now 43. "There was some friction between my sister and me." Even as they were drawing up the incorporation papers, Lisa recalls, "He kept referring to it as 'my store.' I was the baby sister, but I wasn't willing to take a backseat." With every decision, they vied for power: the lettering on the signs, the color of the yarn, the division of departments. One morning Peter came in to find Lisa gone. The store had been open roughly six weeks. "I was leaving to save our relationship," says Lisa. "Unfortun-ately, it wasn't saved."

For a time their parents tried to bring about a reconciliation. If the kids could just hold on until the company grew, Martin argued, they could each stake out a territory. But, says Martin, "splitting up was their decision. It just didn't work." Peter had papers drawn up buying out Lisa's shares and had them sent to her for her signature. "It made me sick," she says. He paid her over two years. "I died with every check," Peter says.

In the 15 years since Lisa left, Wild & Wooly Needle-crafts Inc., based in Falls Church, Va., has enjoyed good times (it appeared on the INC. 500 in 1984) and bad (it filed for protection under Chapter 11 last year). Though brother and sister live only 15 minutes apart -- their children sometimes play together -- Lisa, 37, admits, "We have never discussed what happened. There's still too much pain. This is my big brother after all. But there were words spoken that I still hear ringing in my ears." When they see each other at family gatherings two or three times a year, they are nothing more than cordial.

"I went to her wedding, but we certainly don't have a close relationship," says Peter. "It wasn't worth that."

Interference in Person

Still, the ultimate reason not to borrow your parents' money goes beyond the possibility of a painful feud. What you risk is a split that offers no hope of reconciliation. If that happens, you will lose something vastly more precious -- and irretrievable -- than anything a bank could have claimed. No loan is worth the price that Jeffrey Ullman paid.

Jeffrey's parents, Estelle and Sanford, fronted him $10,000 to start Great Expectations Inc., a video dating company in Encino, Calif., in 1975. There was some disagreement over how to structure the deal. His father, a pediatrician, thought he and his wife should keep 51% of the stock. "I was afraid Jeffrey would be too much of a spendthrift," confesses Sanford. Estelle, however, contended that Jeffrey deserved controlling interest because the company was his idea. Her logic, argued forcefully and passionately, won out.

The Ullmans followed their money to the new business. Dr. Sandy, as Jeffrey's father is known, became the gentle figure in a bow tie who, after a day of seeing patients, shopped for office supplies and took out the company's trash. Estelle became far more actively involved. Working without pay for nearly two years, she acted as a receptionist and a video interviewer. She also dispensed free advice. "Go and lose 25 pounds," she'd whisper to a client. Sixty-year-old men often got warned to look for women their own age. She consoled people whose videos weren't generating any responses and -- explicitly against company rules -- even indulged in some matchmaking. Upon first look, Great Expectations seemed like an archetypal family business: Jeffrey's mother even had adjoining offices with his sister, Dyan.

But as the company grew, so did the tension between mother and son. It irked him that she had 30-minute chats with customers, that she talked business out in the open, that she'd sometimes discourage people who she thought wouldn't do well. "They argued over every damn thing," recalls Sandy. Jeffrey believes that his mother "wanted this to be a mama-papa business. She wanted to keep it kind of small, and I viewed that as sabotaging our growth." Unrelated factors contributed as well; Estelle and Jeffrey's wife did not get along. "Just a little look or a tone would set us off," recalls Jeffrey.

Each wanted the other to change; neither did. They even tried working together without talking. But finally, recalls Sandy, "it just upset her too much. She was doing a lot of crying. She felt Great Expectations was her baby."

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