Viewpoint: Startups and family businesses have much in common…bring them close together

Are family businesses so different to startups? Most people would say yes. But in reality, the two have the same set of values that guide their respective businesses. They need to realise this and the benefits working together can bring to each other.   

If there is a business continuum then startups are at the beginning of that continuum and family businesses are at the end. That’s what most people would say. Startups represent new, lively businesses usually linked to the latest tech trends…and staffed by hip millennials. In contrast, family businesses are stick-in-the-mud, old economy monoliths, run by 60-plus suit-wearing business people, mostly men.

Founders see family businesses as lacking innovation and not linked to the go-ahead digital economy of the 21st century. But neither are families running multi-generation businesses particularly complimentary about startups. Often they see them as not really businesses, but rather lifestyle choices by their founders. Startup founders aren’t real entrepreneurs, so the thinking goes among well-established family business types because they want to sell their business as soon as they can.

But are they really at opposite ends of a continuum, or are family businesses and startups much closer together than conventional thinking might have us believe? Recently, the Campus for Family Business organised by WHU – Otto Beisheim School of Management invited five founders of startups to talk on a panel about their views on family businesses. Surprisingly, from their insights, there are actually many similarities between the two.

The same values

The first big similarity is found in their values. If you compare startups with family businesses the principal values that guide both business types are actually not so different. This is particularly the case when it comes to their staff. Both typically have a big appreciation for their staff. Many family firms or startup entrepreneurs appreciate human capital and rate it highly when it comes to their success.

The second big similarity is the passion they have towards running their businesses. This passion is the cornerstone of their professional life, whether they are founders in a startup, or family members running a well-established business.

So, the view that startups and family businesses are at either end of a continuum is in fact totally wrong. And, as such, there should be more exchanges between family businesses and startups/founders. They need to encourage each other to work together for their mutual benefit. Established family businesses can profit from fresh ideas and startups can gain from family firms’ reliability, network, and quick decision making.

This is true across the world, but might be particularly important in Germany. For the past decade, politicians and business people in Germany have often complained the country is losing out to Silicon Valley when it comes to business success. But, if Germany is able to combine the startup mentality with those of our well-established family businesses then this will help the country compete more with Silicon Valley.

So the importance of creating links between the two will have real economic consequences for the fourth biggest economy in the world. And that cooperation between startups and family businesses will have real benefits to all economies that encourage it.

One point of contact

But if the two are to thrive together, one thing needs to be rectified. Asked what makes it most difficult to work with family businesses, the startup panellists all agreed that it was a lack of transparency. They said: “When we approach a family business we never really know who is the right person to talk to. Often you waste so much time to find the real decision maker at these businesses.”

So, family businesses should name one person for startups to talk to – and that person should be senior enough to make a difference. This will speed up the process and will help grow a very lucrative relationship between the two. And in the process, they will realise the two have more in common when it comes to running their businesses than they originally thought.

Professor Nadine Kammerlander is chair of family business and academic director of the Institute of Family Business at WHU – Otto Beisheim School of Management