Family offices can be a great way to fund or finance the startup you’ve always wanted. In a recent TiE meeting in New Jersey, Vijar Kohli (the cofounder of Golden Door Asset Management in Newark), mentioned that family offices have changed and have paved the way for raising capital and direct investments.
Cyrill Widget, a significant panelist and the executive manager in the family office industry, believes that there are two types of family offices. One that represents a single wealthy family, and the other that serves and manages the wealth of many different families. He also noted that family offices are far easier to come across in the USA as compared to a time when they were more prevalent in other countries.
According to him, family offices require a minimum of $150 million for investment and management. Single-family offices often represent a family structure where the wealth and investments of entrepreneurs are managed. The task of investments is usually given to professional management teams hired by the family while keeping their objectives, preferences, and area of expertise in mind.
Major Requirements
The main areas that family offices invest in include finance, private equity, and manufacturing, but they may also want to invest in deals relating to technology. As compared to a dedicated VC that investigates potential investments, tech investors have strict requirements when it comes to startups and their chosen founders.
Family offices often aren’t approached for capital below $500,000 since family offices continue to cohere their investors and follow-up with funding rounds. However, according to Cyrill, startups with solitary founders are at a significant disadvantage, because people begin to question the aftermath of the startup should something happen to the founder. It is why it’s essential to create efficient management to back you up.
Co-leader of the Personal Wealth Advisors Group in EisenAmper, Timothy shared his own take. According to him, many family offices that work with EisenAmper, invest in private equity, real estate, or sports, in hopes of obtaining sports franchise. Many family offices focus on manufacturing, and EisenAmper offers internal audits, investment advisory, and tax compliance. They also work on making family office operations more effective.
“Presently, we’ve made significant investments in all kinds of financial reporting encryption technology protocols that we make available to our clients, that they’re able to access on a licensed, very secure platform. We have a partnership with IBM Watson projects. We’ve actually had Watson program designs done for us where we are able to assist them to design technology platforms that can make their work in their businesses go more quickly, more securely. … It really saves a lot of time.”
Incorporation of ESG Investments
Eric Kohlmann, the Chief Operating Officer of Trinnacle Capital Management (a hedge fund based in New York), mentioned that he had begun making angel investments from his family funding before working with different family offices. He ran a company that created machine-learning models to form stock predictions based on the evaluation of human behavior and thinking; this was later sold to the hedge fund.
According to him, family offices have made significant changes in recent years primarily, due to the new generation of millennials. Family offices have started to organise and manage their investments, based on ESG or impact investments.
Kohlmann went on to say that family offices function like people, some are logical, while others are artistic and want to make impact investments to make a change in society or the environment. Deciding on pitches for family offices can be quite a task because every office is different, and a pitch that works for one may not work for another.
Finding Family Offices for Your Startup
If you can find single-family offices, make sure to understand their background, preferences, and past investment choices. It will let you know their mindset and future decisions, and if they’re interested in the same sector as you (this means that they will more than likely prefer making investments in that industry.)
It may not be easy to find family offices that want to fund startups, and there isn’t a sure-fire way of getting their attention. However, you can consider attending conferences, or asking for help from professionals such as lawyers or accountants that have contact with someone running a family office.
