What's Below in Issue #75:
📰 - Raising Capital from Family Offices
📊 - Asset Allocation Trends: Rising Fixed Income and Diversification Focus
🎙️ - Podcast #43 w/ Diana Heldfond, solo founder transforming EdTech for special needs
💵 - Premium startup resources
🆓 - Free startup resources
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Today, let’s dive into the world of family offices and explore whether raising capital from them is the right move for your startup. You might have heard about these mysterious entities that manage the wealth of the ultra-rich, but how do they operate, and should you approach them for funding?
Family offices are private wealth management firms established by wealthy families to manage their wealth, plan for succession, and handle financial and investment decisions. They come in two main flavors:
But the reality of any family office is that no two family offices are alike. What that means is there’s no generic approach to connecting with FOs, they are all incredibly bespoke, prefer to stay under the radar and have a very limited online presence. So if you don’t already have access to family offices, you’ll likely have a hard time breaking in. They like to hang out with their peers, AKA, other people with lots of money. If you don’t fit that description, navigating your way to the decision-makers will be a heavy lift, and you’re better off chasing VCs or angels.
According to the UBS Global Family Office Report 2024, family offices tend to be highly diversified in their investment strategies. Here are some key insights:
While family offices are involved in various asset classes, direct investments into startups are less common. Here’s why:
Family offices generally prefer to invest in later-stage companies. Here are some common scenarios where they might be inclined to invest:
Here’s my take: If you don’t already have an established relationship with a family office, the odds of raising money from them are low. They tend to be more relationship-driven and risk-averse compared to traditional VCs. However, if you do have connections or if your business aligns well with their strategic interests, family offices can be fantastic partners due to their long-term investment perspective and substantial resources.
My Recommendation: Focus on building relationships with family offices well before you need funding. Network through industry events, mutual connections, and by demonstrating consistent progress and strategic alignment with their interests.
In conclusion, if you’re struggling to attract venture capital and think family offices are your savior…don’t hold your breath. It’s going to be a lot harder and you’re better off re-evaluating your business and your capital needs to put together an attractive offer to investors to lure them in. But that’s something we will save for a future newsletter. If you want me to cover the topic of capital strategy and determine how to craft an investor-ready deal, reply to this email with a 👍
-------------------------------------------------------------------------------------------------------------------------------------------------------------Data Corner
Family offices are growing cautious. The UBS report shows a rise in their holdings of developed market fixed income (the highest level in five years). This shift, alongside concerns about geopolitical tensions (62% of respondents) and climate change (nearly half), suggests a more risk-averse approach.
Opportunities exist, but only for established startups. While North America remains a preferred region (over 50% allocation), family offices prioritize later-stage companies. Only 22% of their portfolios go to private equity, with just 11% in direct investments. They typically co-invest with established firms.
Building connections with family offices well before seeking capital is key. Their cautious nature makes them a better fit for established startups with proven models, especially those in North America or leveraging generative AI (favored by over 78% for future investment).
-------------------------------------------------------------------------------------------------------------------------------------------------------------Listen to Diana Heldfond's Journey From Dyslexia Diagnosis at 7 to Raising $29M Solo in Episode 43
We're thrilled to have Diana Heldfond, the solo founder and CEO of Parallel, join us in this episode. Parallel is a cutting-edge virtual care platform focused on aiding children with learning and thinking challenges such as dyslexia and ADHD. Under Diana’s leadership, Parallel has raised over $29 million and now works with numerous school districts across the US, integrating healthcare and education through innovative technology to provide tailored and effective support.
Diana discusses the unique challenges and strategies of fundraising as a solo founder. She talks about how she cultivated early relationships with investors, crafted compelling narratives to manage fundraising timelines effectively, and faced investor rejections head-on. Her strategy shows how crucial it is to be resilient and plan ahead when getting funding alone, without a co-founder.
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