Who introduces you is more relevant than being introduced to a Family Office
Once you’ve targeted on your family offices, here are some guiding tips to mind:
The Premise. There is no pressure for any family to put capital to work. Unlike a private equity, Venture, hedge or asset manager they need to show their fees are being earned. Families have no one to answer to but their own accounts. Your timing is irrelevant. What is relevant to the families is investment reward to moving fast.
The Family Front Office. It’s important to know the history of the family. Their evolution, what generation wealth, are they one of many affiliate offices as the family has grown and the original capital divided out to the family members. Is this a professionally managed office or are the principals active. These factors determine timing and process. The less formal the office, the more inclination that the sales process can be longer: The more formal of a process may be faster as the hired professionals are there to earn their keep, they’ll tend to stay on the ball.
The Approach. Who introduces you is more relevant than being introduced. Family offices, in particular regionally located ones, are a tight knit group. Many have a steady feed of opportunities from familiar groups, paid or synergistic professionals, cap intro professionals they’ve worked with and like. Cold calls will make it harder and in fact, string out the process as the office validates the opportunity and the managers. If you met so-so at this conference, or a wealth manager, do the DD to determine if that’s a so-so that does have a good inside track into that family. Good meaning, the families actually respect the group or individual. It may be worth it to cough up an introduction fee for a proper introduction.
The Family Office Mandates. Investment allocation can be as strict as any private equity, hedge or managed account. Before you ring their doorbell, is your opportunity part of that mandate. Is it relevant to their operating company or companies if they still have them: Could it be the operating company is the better fit? Even if they invested in something in your industry or type of fund does not mean the office remains interested. That could have been crazy Uncle Ben’s investment idea, the previous generation or the recently departed professional’s strategy. The office may have your type of allocation managed by a third party wealth manager or gate keeper: then you are barking up the wrong tree.
The Decision Making Process. Not all family offices are informal or professionally managed. Not all family offices have one decision making process or investment committee. Even if there is an investment committee it could be a unanimous vote of 38 angry relatives, majority of 3 professionals that have competitive interests with 1 family member as the final vote (and you have no idea who that member is) or merely 1 person, whether principal or professional manager, who’s decisions are based on his inner personalities and the counsel of his peers. Understanding the process can save time and your businesses confidence. Find the investment professional or principal at the office who is interested in the opportunity; help them be your friend or ally.
Size And Number Of Checks. Do they write big checks for certain allocations or are they across the board the same. What’s the gating issue to scale up for more. Are they good for one fund or round or two? Does the check sizes go up or down for re-ups. Maybe a pass now, build the relationship value and keep this family for a later deal?
The Club. Family offices, even the newer UAE Family Offices, surprisingly enough are globally interconnected; especially the younger generation. Some family offices always co-invest with each other, you get one you get both, you lose one you lose both. They refer deals to each other. So, if an opportunity has been rejected by an affiliate, you can save time and not stop in — don’t think you can change anyone’s mind because you’re special. Blood is thicker than water, these relationships have deep roots. Some family offices will have given mandates to larger institutions for the type of opportunity you’re pushing. If these have invested in you then there’s no interest by that family to putting further capital to the same risk. If they have rejected you, see the previous sentence. Don’t burn bridges. Unlike institutional funds, these principals won’t be moving onto another job.
Human Nature. Family offices reflect the principals. In particular, the younger generation managed offices in the GCC region, there is petty rivalry and healthy competition among the offices. There is also generation transfer considerations which impact on the dynamics of that office’s investment process. And, a word on the obvious, the newer offices made their wealth in this generation and have the acumen to discern: A small dose of humility may work that doesn’t border on sycophantism when selling into these offices.
Working with family offices, managed properly, can be incredibly rewarding, there is often more loyalty involved, patience is key.
#ObediahAyton #Familyoffice
