“What Attracts a Family Office to Your Offering?”

Over the last ten years, private investors with significant personal wealth have grown in their prominence as a bona fide investor class. Unburdened by the mandates and time constraints of a typical private equity fund, these investors have also become a highly coveted resource for growing companies. Regardless of their AUM, location, generational heritage or industry focus, you can rest assured that these investors want to invest not only from their pocketbooks but also from their experience. Our firm works with a large and growing number of family offices interested in high-quality, curated deal flow and is frequently counseling issuers on how to present themselves to family offices. In this post we will cover the basics of a family office, their motivations for investing and how they write checks in cash and experience.

Family Offices come in all shapes and sizes

Let’s start with the basics of defining a family office. The term is used so commonly that I think it is important to spend time understanding what separates a family office investor from an institutional or retail investor. The atypical family office is launched by an investor or their family who has generated significant wealth through admirable business ventures, asset growth or similar uncommon endeavors. They are often very well educated and highly sophisticated in evaluating investment opportunities. Tired of fee-driven fund management models with sub-par returns, these investors have sought to leverage their experience and success in creating wealth as tools to protect and grow their personal fortunes.

These investors range from private individuals with substantial liquidity ($50mm +) to sophisticated organizations formed for the purpose of managing the investments of a multibillion dollar, multi-generational family (or families). Some of these family offices are very organized and well staffed with prominent offices in the world’s leading cities. And other family offices have no staff and rely on a network of professionals for advisory services. In either case, these investors are not “dumb money” and are often harder to win than most institutional investors and certainly most retail investors. But they are a rewarding partner who is worth the additional work and commitment given their tremendous ability to support principal investments with cash and strategic resources.

Family Offices are often motivated by more than returns

When we are engaged to work with an issuer or family office to structure or arrange capital from this investor class, we find it important to clarify the motivations behind a family office-led investment. Wealth preservation is key and the decision maker involved in writing a check has intense personal reasons to make sure that his investment is protected and secure.

Whether the term sheet describes the investment as debt or equity, the protection of principal is tantamount. We sometimes joke that securing an investment from a family office is like borrowing money from your uncle. He will trust you the first time, expect to hear from you and he will want his money back. But if you follow through and return his principal with a profit, he will be a valuable resource for follow-on investments and transactions. Integrity is key. There is rarely a structured investment committee. Communication and professional reporting cannot be overstated. This type of investor will want to see that your interests are aligned with the protection of their principal and that outsized projections are balanced with a clear plan to protect the family’s principal.

When presenting to a family office – KNOW YOUR AUDIENCE

A final consideration when presenting to a family office investor is to be sure that the investment offering and underlying business is in line with their view of the world and related investment interests. Presenting a technology investment to a family who made their money in manufacturing and wants to relay this experience into helping grow new companies is futile. Presenting an oil and gas deal to a family concerned about climate change and overpopulation is going to sour a relationship and go nowhere. But presenting a compelling new non-toxic approach to garment dying to a family who created wealth in the garment industry will likely receive rapt attention. Issuers who want to attract capital from family offices need to know their audience.

Understanding the family office’s wealth background, personalities and general view of the world also needs to be coupled with an understanding of their self-imposed investment parameters. Is there a preference regarding the stage of investment (ie. seed, early stage, late stage, distress) or the size of the initial check? Approaching a multi-billion dollar family office with a $2mm Series A round may be a waste of time unless you know that they invest in early stage offerings. As varied as the wealth backgrounds of family offices may be, the individual investment mandates of these investors are just as varied. It is critically important to do your homework and learn as much as you can before approaching a family office with an investment idea.

More than a Capital Source

In summary, the family office world is growing every year in its viability as a recognized capital market. An understanding of the wealth background, investment interests, social concerns and current mandates is critical when deciding who to call on with a new offering. This is a capital landscape with a large amount of available cash and a wealth of experience. The issuer who is able to secure an investment from a family office has likely aligned itself with a partner who will deploy more than just money into helping grow their enterprise.

About Crestmont Investments

Crestmont Investments is a New York based partnership [registered with Weild & Co., a FINRA registered broker/dealer] that serves as a placement agent presenting bespoke investment opportunities to over 300 family offices and select private investment firms. Crestmont relies on partnerships with family offices, investment banks and wealth advisors to source, evaluate, arrange and structure direct investments across a variety of industries with a primary focus in all forms of energy and natural resources, healthcare and life sciences, manufacturing and technology.

– Blog post by David Beach Crestmont Investments LLC

June 2020 All rights reserved


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