Family Office Investors: A New Age of Investors

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Introduction

Family office investors have established a reputation as direct investors who are quick on their feet and more aggressive. This is has become the modern-day family office. They have established themselves as notable players in the international investment markets. This is all thanks to their access to significant funds and some of the greatest financial skills. First-generation family offices are particularly well-suited to seize possibilities in a post Covid-19 economic climate. while also influencing. These family offices often have direct entrepreneurial experience.

Family offices have been known for managing assets worth just over £3 trillion, all according to the The Economist. This allowed them to stay competitive with established qualified investors in the most lucrative, albeit more complicated, investment areas, such as private equity transactions.

The Origin of the Family Office Family offices are the future

Most experts assume that the family office originated in Europe. However, House of Morgan and the Rockefellers quickly refined and standardised it in the United States. The main force behind the growth of family offices in the past several years has been wealth management, which is not surprising given the spike in the amount of billionaires and the shorter time it takes to become wealthy. The emphasis on multi-generational asset preservation, new forms of investment possibilities, and global volatility are further drivers. All of these factors need expert counsel.

Involved Directly

The youthful generation is more involved compared to the previous generation. Partly due to their increased activity as direct investors. A significant portion of the recently created wealth is the work of self-made, astute businesspeople. Although not wanting to be CEO’s or founders, are nevertheless looking for ways to contribute to the development of new, successful enterprises.

Recent industry data demonstrates that family offices are investing in both emerging and well-established private enterprises globally. They have developed the skills to create their own investments, using their networks of ultra-high-net-worth individuals to chase lucrative possibilities. This is frequently without the need for conventional financial intermediaries. Family offices are growing in strength within their respective businesses as a result of the cash that is accessible in the market and the values that guide their investments.

Avoiding Time Wasting

The capacity of family offices to act quickly on openings before the majority of other eligible investors can is one of the less unexpected characteristics of their investment behaviour. Family offices can effectively use their sizable capital pools and use the highly qualified employees. Family office investors are not constrained by complex decision-making frameworks. They can thus evaluate, make decisions, and distribute cash with unparalleled rapidity, which is especially useful when circumstances are tough.

Entrepreneurs

Wealth creators of family offices, particularly the first-generation ones, are in high demand as strategic investors. We can also include those that have inherited their wealth as well. They have one unique advantage over other sorts of investors: their entrepreneurial know-how. In my experience, the primary goal of family offices operated by entrepreneurs is rarely simply asset preservation. Instead, they are astute, smart deal-makers who may produce significant value by utilising the resources and knowledge they have accumulated in the past. When navigating choppy seas, it is priceless to be able to draw on the expertise of an experienced entrepreneur as the world’s economy slowly recovers from the COVID-19 pandemic.

Longevity

This one is quite obvious; however, family offices have extensive amounts of money. This can typically make them more reliable in the long-term. Startups may feel that they can rely on family offices better, due to a lower rate of risk, in case of any negative impacts. Family office investors are more inclined to invest in more riskier projects. The riskier, the more innovative. Potentially, finding that one Unicorn.  Family office investors often have a lengthy investment horizon. This sets them apart from other players in the private equity market and is a luxury when money is tight. A family office will focus on businesses that have the potential to produce wealth over the medium to long term, without a predetermined expiry date, as opposed to the usual private equity fund, which will work toward an exit from the beginning.

Leaving an Impression

Modern family offices position themselves very well post-Covid-19 economy. This is due to their distinctive mix of talents and capabilities. They have a long-term investment horizon and a value creation mindset that is more entrepreneurial than speculative. They are a welcome new voice to be heard, on top of their investment and capital experience. This sets them apart from the prevailing values that many other investors follow.

Family Offices vs Venture Capital

With family offices and VC firms taking over the world of tech startups, let’s look at what differentiates them and how they work to expand the global ecosystem.

Family offices, particularly single-family offices, are focused on one’s family wealth and provide a variety of supplementary financial services to assist them in expanding and protecting their portfolio. Venture capital firms, on the other hand. Are gathering money sources from a variety of sources and concentrating entirely on the source, assessing, and picking the finest investment agreements for the funds spent. A family office may contribute funds to a venture capital fund.

Family Offices vs Hedge Funds

While both are wealth management institutions that assist families and individuals in protecting their high net worth, structurally and objectively they are quite different.

Hedge funds safeguard portfolios from bad markets through diversification and actively managed assets. Family offices, on the other hand, take the process a step further by bringing in a specialised team of specialists to provide financial services for the family assets.

Family Office Advantages

For wealthy individuals, the primary benefits of family offices include the management of complicated trusts for their clients, assisting individuals and families in aligning their investments to their interests, and the family heritage. Family offices may assist you with protecting your assets, transferring a firm to another owner, and educating your family on asset protection.

Family offices have expanded and diversified their services throughout time, and they currently provide a wide range of advantages. Some of the financial advantages include:

Lower Investment Costs & Portfolio Protection

Running your own family office might be more efficient than working with a standard venture capital fund or other sorts of investment organisation. You simply need enough power to cover operational costs and a few savings to supplement with external knowledge as needed.

Your internal team will be represented by family members, who are more likely to have same aims.

Long-Term Investment Strategy Backed Up By Effective Planning

Many rich families throughout the world consider succession planning in addition to increasing their family company or assets. They have a long-term vision of how the family’s wealth should be transferred and expanded over future generations, from charity giving to other acts that have a greater influence on the world around us.

This is one of the reasons why family offices prioritise family governance and effective investment management above all else.

A Central Ecosystem that Connects Everyone

A family office, as opposed to a standard enterprise firm with everyone participating, has everyone linked and working towards the same goals. Family office representatives want to know how wealth management is progressing and how they may keep informed about portfolio movements.

Conclusion

Family Offices are only becoming more prevalent. The future looks bright for family office investors, as more startups may benefit greatly from the opportunity. With a large amount of capital at their disposal, as well as the interpersonal touch of family office investors have, businesses in their early stage may be keener on working with them over even some of the experienced heads in investment. In the age of transparency, family office investors do not seem like they’re going anywhere.

You may also like – The Family Office Perspective on Venture Fund Allocations

 

Amit Khanna

Amit Khanna, 7startup Founder

 

Amit has 18 years of experience in the industry and an MBA. He supports entrepreneurs with every aspect of their business including concept and product development, investor presentations, and fundraising. Amit & 7startup assist startups in the pre due-diligence process and help connect them to our vast network of investors. Reach out to us today and see if we’re a fit!

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