By Chris Farrell
Each family member brings different skills to the business
What image comes to mind when you hear the term “family business?” A company in its second and third generation of family leadership? (You may think of the fictional John Dutton, seventh-generation owner of the Dutton Ranch on the television show “Yellowstone.”)
However, there is another type of family business that is emerging with the demographics of an aging population. Older parents go into business with their adult children late in their careers or in traditional retirement.
Multigenerational startups are one of the more exciting entrepreneurial trends in American society. “These intergenerational mergers are energizing and, to me, a great blueprint for future success,” writes Kerry Hannon in Never Too Old to Get Rich: An Entrepreneur’s Guide to Starting a Business in Midlife.
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These intergenerational startups are part of a much larger economic and social shift with an aging population: an increase in the number of entrepreneurs over 50, including small business owners, the self-employed, and sole proprietors. The Kaufman Foundation, an organization that focuses on entrepreneurship, reports that the past quarter century has seen a significant increase in the number of older entrepreneurs. In 1996, nearly 15% of entrepreneurs were between the ages of 55 and 64 compared to nearly 23% in 2021, an increase of 53%.
Self-employment also increases with age, especially among workers over 65. Researchers have even found that the success rate of business founders improves with age. In “Age and High-Growth Entrepreneurship,” four economists studied the founders of growth-oriented businesses. Despite the perception that America’s corporate dynamo is created by young entrepreneurs, their research reveals that founders’ “batting average” rises dramatically as they age. “Conditional to starting a company, a 50-year-old founder is 1.8 times more likely to achieve higher growth than a 30-year-old founder,” they calculated.
That being said, there is something very cool about experienced workers and retired professionals embracing entrepreneurship as a family affair. The household economy is attractive.
Adult children usually bring hustle and bustle to the venture. They are usually comfortable with the latest technology and social trends. Elderly parents often invest some initial capital. They have a lot of experience to draw on and networks to tap into.
I recently stumbled across two examples from the field of education that illustrate the trend.
Toby Madden, age 60, retired in 2015 from his career as an economist at the Federal Reserve Bank of Minneapolis. Toby went on to several entrepreneurial ventures that engaged him in his next act, but he kept coming back to an idea he had nurtured for decades: using video games to teach middle and high school students the basics of economic thinking. “For the past 30 years, I’ve had a quest to create a fun video game that explicitly teaches microeconomics,” he says.
Serendipity in the form of a pandemic intervened in 2020. Chris, one of his sons, was teaching English in South Korea and lost his job due to the pandemic. Chris and his wife moved to his parents’ home in Minnesota. Chris and Toby decided to develop an economy-based video game built around a mystical island that Chris had imagined when he was young. Neither of them had any experience in game development, but they figured that with Toby’s knowledge of economics and Chris’s teaching experience, they could make it work. Toby planned to spend $150,000 of his retirement savings on the business.
“My dad really wanted this to be a game that everybody would see, and they’d pick it up, they’d like it, they’d enjoy learning it,” says Chris. “They learn economics by accident.”
They did a ton of research and worked with developers, illustrators, voice recording experts and others from several states and countries. Toby took over game design and Chris focused on marketing. They completed an economic role-playing game on a PC and two puzzle-type applications for smartphones to learn about supply and demand. Despite occasional creative tensions, both say they enjoyed working together on the project even though the game never developed a large following. (Chris and family moved back to South Korea while Toby and his wife moved to Naples, Florida. If you want to watch the game, it’s here.)
“I think we grew closer and learned a lot more about each other as adults than as teenagers,” says Chris.
Peter Reich, who will turn 70 in January, is a professor in the Department of Forest Resources at the University of Minnesota and director of the Institute for Global Change Biology at the University of Michigan in Ann Arbor. In 2011, Peter, his sons Henry and Alex, and several other creatives started the science education video series MinuteEarth. MinuteEarth now has over 2.7 million subscribers on YouTube alone. “We wanted MinuteEarth to be about a lot of things about the environment,” says Peter. “Climate change, food, geography, ecology.”
Each family member brings different skills to the business. Each works part-time on the project since they all have full-time jobs. It is a small company and more than three family members. The team averaged seven to eight people over time. Everyone brainstorms ideas and invests time in videos to get the right scientific information and create a fun experience for the viewer. The model that informed MinuteEarth was the MinutePhysics videos developed by Henry. (MinuteFood launched in 2022)
“All three of us played quite different roles as part of a larger team,” Peter writes in an email after our interview. “Mine has always been a minor player primarily involved in writing scripts and developing sponsorships; and that I would like to emphasize the tremendous contribution of the incredible (non-Reich) team from time zero until now.”
Peter did not dig into his pockets to finance the venture. MinuteEarth quickly gained viewers, and over the years numerous foundations and organizations have offered financial support. The business essentially operates as a non-profit organization with most of the money going to salaries. “We had to learn very quickly how to run a business and how to make sure it was done legally and appropriately,” says Peter.
The key to understanding how to start a multi-generational family is the realization that the generations love each other more and more. Many adults get along with their elderly parents, and vice versa. During my interviews, the affection and respect between the generations was evident. The disagreements, she recalled, didn’t seem contentious, but rather the kind of back-and-forth typical of any creative endeavor.
The experience of the Maddens, the Reichs, and others from multigenerational family startups I’ve talked to over the years seems to mirror the results of Pew Research’s “Forty Years After Woodstock, a Gentler Generation Gap.” Research shows that only 10% of surveyed parents of older children say they often have major disagreements with their teenager or young adult child. That number is much lower than the 19% of adults who recall frequently disagreeing with their parents when they were in their late teens and early 20s.
Similarly, in their “Decade Review of Intergenerational Ties: Technological, Economic, Political, and Demographic Changes,” researchers Karen Fingerman, Meng Huo, and Kira Birditt found that adult-parent ties are more common than any other relationship in adulthood. “Indeed, the bond with a parent or adult child may be the most important relationship in many adults’ lives,” they write.
Scientists may not have had a multigenerational startup in mind when they wrote that sentence, but the sentiment is spot on. Society and the economy are better off because of the connections that lead to the new enterprise.
-Chris Farrell
(END) Dow Jones Newswires
01-07-23 1123 ET
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