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Considering Family Offices?

If you ask a founder where they should raise capital, they will almost always tell you from a VC. However, most VCs are funded by secretive powerhouses that can also invest in startups – Family Offices. These are investment vehicles that usually service multi-generational family fortunes. Their focus is to invest and preserve the fortune to support the extended family, often consisting of billions of dollars in AUM. However, unlike venture capital firms, they are usually very secretive. Many family offices don’t have websites and those that do are often only a few generic pages with limited ability to contact them. Moreover, unlike venture capital firms that boast their investment team, family offices often hide who is on the investment committee, making it even harder to contact them.

There is no secret sauce for coming onto their radar. It requires networking with other founders who have managed to schedule meetings and creating a pitch aimed directly at what the specific family office enjoys investing in.

There are many reasons founders should consider pitching family offices:

1. Long-Term Investors. Unlike venture funds that have an 8 – 10-year time limit to return capital to their investors, family offices can set their time frame. This means that they don’t need to push founders into a frantic scramble for a quick IPO or sale and can instead help the firm grow at a steadier pace that will generate high returns over the long run.
2. Fast Investment Decision. Family offices are all very different in how they conduct due diligence and come to investment conclusions, however since they are managing their own money they often have less bureaucratic procedures than most VC/PE firms. We know of many cases where the main Principal of the fund invested into a started within a few hours of meeting them, which is much faster than any venture fund can usually accomplish. This does not mean that every family office operates this way, but most have much less formal investment procedures than classical funds.
3. Industry Expertise. Family offices are often started by a family member that was incredibly successful within a specific industry and much of the investment focus will remain within that industry. For example, a family office started by someone very successful in real estate will usually be most interested in deals surrounding real estate. This allows for deep industry insights for their portfolio companies and top-tier potential client introductions.
4. Creative Investment Terms. Cash for equity is not the right investment vehicle for every startup, but it is the only investment method that VCs are allowed to use. For example, a startup that wishes to use creative financing with a combination of equity, royalties, and debt will have a very difficult time finding a VC to do the deal. However, family offices are more than happy to take such a partnership for the right terms. On the other hand, family offices will usually provide less attractive terms than classical VC/PE funds since they are more flexible and can chase deals that most funds are not able to participate in.
5. Vast Network. While it may be difficult to find family offices, they usually know each other very well and share deal flow. Most are LPs in other large VC/PE funds and can easily make introductions for startups they like. Additionally, they often have connections with large business leaders that can benefit the startup.

Relevant Articles to Raising from Family Offices

• Why Founders Should Consider Family Office Money Alongside VC Money: Unlocking Unique Benefits - 👉 Medium

• How VCs Get Their Capital: Family Offices - 👉 Kruze Consulting

• Family offices: What an alternative to VC funding can offer founders - 👉 Sifted

Data Corner

Investors are focused on AI/ML

As news stories surrounding AI/ML keep sharing the latest updates and progressions in the field, VC investments have largely been centered around this vertical with little signs of changes.

Founders need to realize that being part of a hot trend is often a large component of receiving venture investments. However, it is also important to avoid pivoting your startup to be in part of the "hot" sector if it is not beneficial to your startup. The interest can easily change and leave you with a pivot that hurts your underlying startup.

Fundraising Demystified Episode #20 is Live!

This week on the #FundraisingDemystified podcast, we are joined by Melissa Kwan, co-founder and CEO of eWebinar.  Melissa shares her rich experience as a bootstrapped entrepreneur who has chosen to pursue a different path than raising venture capital. She opens up about her journey, the challenges she faced in her previous ventures, and how she has shaped her career to remain completely bootstrapped moving forward. Along the way, Melissa has not only redefined her concept of success but also lived a fulfilling lifestyle that aligned with her definition of success.  

🚀 Here are 3 key takeaways from this episode that you won't want to miss:

1. Fostering Autonomy and Profitability on Your Terms. Bootstrapping a business provides an opportunity for founders to have complete control over their company and the decisions they make. It allows them to build a profitable business on their terms, without the pressure and expectations that come with outside funding. By relying on their resources and ingenuity, founders can experience the fulfillment and autonomy that come with building a successful company from the ground up.
2. Having Control Over Business Decisions. Founders should prioritize maintaining control over business decisions and avoid situations where they are compelled to sell before they are ready. By retaining control, founders can ensure that their vision and values are upheld and have the final say when it comes to the future of their company.
3. Redefining Success on Your Terms. Melissa's realization serves as an inspiring reminder to entrepreneurs that success does not have to be validated through external funding. It is essential to shift the mindset from seeking validation through venture capital to defining success on one's terms. Happiness, fulfillment and the ability to make decisions that align with personal values and goals are far more important than conforming to societal expectations. By prioritizing autonomy and control, founders can create their path to success and find fulfillment in the process. Listen Here

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Written by Jason Kirby - https://www.linkedin.com/in/jasonrkirby
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