Single Family Offices: Opportunities with Private Equity & Venture Capital

“Family Offices are too invisible and too secretive. I really don’t think this is doing us any favours. said Simon Foster, CEO of the TY Danjuma Family Office, sharing his view at an industry breakfast covering Family Offices and Private Equity/Venture Capital Working Together – Opportunities and Pitfalls.

“Now that said I think there is a reason for our defences. I think all family office executives have been at conferences where we look at our name badges and realise we are the only family offices in the room. Unfortunately this is just about the time the Manhattan hedge funds come to the same conclusion. Then the bloodletting begins…”

There is a whole lot of truth in what Simon says. Single Family Offices (SFOs) in Europe are very private, largely because they want to stay out of the salesman’s reach. This means it’s not obvious what their investment strategy is, which in turn leads to sales calls which are untargeted and time-wasting. Some Family Offices have concluded that the best way to avoid this is to stay off the radar altogether. They normally don’t have websites or if they do they don’t advertise telephone numbers or have obvious email addresses.

Jon Greene, Head of Research at the Family Office Council, explored the problem further: “There are family offices that have shared information and they have been burned. This is because there is huge pressure on salesman to push whatever they have to the family office regardless of the family office strategy. Its much better to meet family offices in an environment which is relaxed, so you can get to know what they want.”

The outcome of secrecy is that Private Equity & Venture Capital Funds are frustrated by the single family office market because the time (and cost) of discovery and engagement is elevated. “The costs of acquiring business is high and most ‘introducers’ are useless”, said one Fund Partner.  Choosing the right partner to work with to engage with family offices is key, because the market is riven by fakers and chancers, and there is no getting around the fact that the nature of the family office world is personal.

“Old school relationship management is the key” explained Simon.  In other words you need to get to know the family office people and make them feel treasured, important and appreciated.

What’s more, there are other ways of PE/VC’s working with family offices over and above capital raising. ‘We tend not to invest in funds” said Simon, “But we want good relationships with funds. One day we may wish to exit our businesses or co-invest alongside a fund because of their expertise. We are in it for the long term.”

The moral is that SFOs can be great long-term partners for funds if they can get access to genuine single family offices. But no-body should expect that to be easy or a quick fix.

This note arises from industry breakfast organised by the BVCA in partnership with the Family Office Council on 17 April 2018 entitled: Family Offices and Private Equity/Venture Capital Working Together – Opportunities and Pitfalls.