3 Ways to Raise Funds for Your Project from Family Offices.

Networking with family offices.

FAMILY Offices serve as private wealth management firms for ultra-high net-worth families. First pioneered by John D. Rockefeller in the early 1800s, modern Family Offices originally operated through exclusivity; each office existed to serve a single person or family’s wealth. Recently we’ve seen the evolution of multi-family offices that pool resources from different individuals or families. Campden Research recently estimated there are currently 7,300 single-Family Offices worldwide, with total assets under management of $5.9 trillion, backed by an impressive $9.4 trillion in family wealth. Thanks to this phenomenal growth in both wealth and popularity, many ventures started seeking Family Offices as a way to raise capital for their projects, but not all of them managed to achieve this funding. In fact, the National Venture Capital Association estimates that 25% to 30% of venture businesses fail to achieve their desired funding. So, in order to avoid common mistakes and successfully approach and raise capital from Family Offices, pay close attention to these 3 key steps that will be presented in this article.

Step 1. Consider the timing and the form of your approach.

When seeking to get funded by a Family Office, the timing and the form of your approach are crucial to the success of your project funding. Let me paint the picture for you: For example, according to the UBS Global Family Office Report 2020, an average of 13% of a Family Office’s portfolio exists as cash. This is a drastic change from the 2% reported by UBS/Campden Wealth in 2016. Let’s say, at that time, you had pitched to a Family Office where almost all their assets were already invested; your process would be considerably slower because in order to contribute to your fundraising, the Family Office would need to sell off assets. In situations like those, consider pitching to Family Offices that experienced a recent liquidity event; they will likely aim to rebalance their assets. As for the method of your approach, seek adequate ways to do so. As Elaine Chow, Principal at Trinity Capital, Hong Kong, stated at the GILC Family Office Gathering: “If you shoot a random email, it will probably be ignored because we don’t even know who they are. But finding a common connection on LinkedIn or getting introduced by a trusted person makes you and your project far more interesting from a Family Office perspective.”

Step 2. Do your research and consider the Family Office’s investment focus.

A crucial mistake that many project owners make is to pitch Family Offices in projects that have nothing to do with that Family Office’s goals, as Guneet Banga, Executive Director for The Caravel Group, Hong Kong, a member of the Global Investment Leaders Club said, “If a project owner can’t be bothered to spend ten minutes researching me, then I just don’t have time for their project. It is a complete waste of both my time and their time. It also shows that the project owners are just randomly pitching Family Offices, which is definitely not a good sign.” So, before approaching a Family Office, you want to drill down what this specific Family Office is about; where have they made their fortune? What business principles do they practice? What are their core values? According to the UBS Global Family Office Report 2020, 54% of the next generation will still have the same investment focus as their predecessors. Therefore, knowing the personal and professional belief systems and investment focus behind a Family Office will help you better pitch your potential partnership.

Step 3. Create value before, during and after the presentation.

A recent global survey conducted by Silicon Valley Bank suggests that as many as three-quarters of Family Offices have invested directly in new ventures that they considered to be valuable and profitable. So, if a Family Office is considering your project, walk them through the steps of that option in full detail. If they want to be more involved and have a seat on the board, show them what it would look like through examples and data, but be attentive to what the decision-makers of that Family Office have to say. As Marta Albert, Principal at QG Family Office, UK, a speaker at the Global Investment Leaders Club Family Office Gathering, said, “The main problem people have when they approach Family Offices is that they don’t listen. They just insist on their project and disregard what the Family Office members have to say or ask.” So, when presenting your project, you should be transparent and rich in detail while remaining attentive and as helpful as you can to answer any questions or doubts that the decision-makers of that Family Office may have. Once trust is established, you may solidify your partnership through a private placement memorandum that discloses the legal liabilities.

Conclusion.

Family Offices can be a great source of investment and fundraising for businesses and projects. If you are successful enough, you may even end up starting your own. Although it is true that building a successful and trustful long-term relationship with Family Offices as a way to fund your project takes time, persistence and effort, as long as you follow these crucial guidelines that we laid out, this process should and will happen in a much quicker, effective and successful manner.