With a burgeoning start-up ecosystem and more businesses seeking to raise capital, Family Offices are playing an increasingly important role in the investment matrix of early-stage companies. In this article we share what a family office is and how you raise money from them.
A family office is a private advisory firm set up by Ultra High Net Worth (UHNW) individuals to manage their financial and legal affairs. There are both single and multi-family offices, meaning they deal with the affairs of more than one family, but the former is more common. There has been a sharp increase in the number of family offices in the last 15 years to approximately 10,000 globally, largely due to the increase in wealth at the top of the market. It’s understandable that these UHNWs want to have their own teams in place to manage their finances, especially as they consider how they will transfer wealth through generations.
Whilst Family Offices manage the wealth of UHNWs across all asset classes, often an important part of their investment strategy is to make long-term investments in start-up and high growth companies that can deliver significant returns in the long-run. Family Offices are often also interested in impact investing as the families look to leave a legacy for future generations beyond the purely financial.
There are some very important differences between Family Offices and any other sources of private equity funding it’s worth understanding before you make FOs part of your investment strategy. Unsurprisingly, the work of family offices, and indeed their very presence, is often behind closed doors. Their work is discretionary, private and you’ll be lucky if you can find more than a handful that even have a website. They tend to work with a select group of individuals and investment professionals they trust and have built relationships with over many years to source and refer investment deals for them. This means cold-outreach to FOs is almost impossible, and the best way to get your investment opportunity in front of them is to have a warm introduction. There’s no quick wins in raising money, but if you’re under any illusions that there is “loads of money out there” and raising from a billionaire family is easy money because they have a lot of it, think again.
The process of getting ready to raise money from a family office is much the same as any other form of fundraising, but it’s certainly worth bearing in mind that family offices tend to take much longer to come to an investment decision. They are also managing investments in all asset classes as well as dealing with personal and legal affairs of the family which means investing in start-ups can fall by the wayside if they are prioritising other projects.
Of course, there are exceptions to this. BRAN Investments is a great example of a family office with a forward-thinking approach, openly inviting businesses who meet their investment criteria to submit their pitches via their website. Increasingly, Family Offices are hiring specialist investment managers who approach start-up investing in a similar way to venture capital funds. This means that just like VCs, there is process, due diligence and governance involved.
If you’d like to find out more about raising capital from Family Offices, why not apply for a free 20 minute Office Hour session with Raising Partners to discuss your fundraising needs. No strings attached!
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