The Rising Popularity and Prominence of Family Office Investments

The growing popularity and prevalence of family office investments are undeniable. These private wealth management advisory agencies continue to serve investors with ultra-high net worth with a different approach than what most traditional wealth management firms use today. The underlying venture capital strategy used within such advisory firms is the cornerstone of what separates it from others.

Understanding the Advantage of Family Offices 

Family offices investing in startups provide an outsourced solution for financial management and investments of affluent families. For instance, a growing number of family offices offer solutions related to family-owned businesses, charitable giving, wealth transfer opportunities, tax services, budgeting, and insurance. In addition to expanding in-house capabilities to host startup investments, these family offices can effectively increase allocations towards venture capital to take full advantage of the long-term potential of early-stage business opportunities.

Embracing the Potential of Family Offices

With the increasing number of family offices, it makes sense why these private advisory firms have stepped up venture participation in recent years. The bull market and financial crisis of 2008 reassured a significant number of high net worth families of the need for asset management oversight. Once the renewed interest in venture started to spike, it was clear that family offices were a primary source of that growth.

The efficient operation of a family office speaks volumes about its overall success and long-term potential. For instance, the typical family office staff consists of 8-9 people, including one venture capital expert, 4-5 investment professionals, and 2-3 family members.

Changing the Face of Venture Investments

Single-family firms can focus on the needs of one person and their family. On the other hand, multi-family agencies have the resources needed to accommodate multiple families. As mentioned, the objective is to prepare these families for challenges and obstacles identified in the financial forecast. For instance, most family offices specialize in the management of cash, risk, and assets. Besides, a growing number of firms combine these core services with lifestyle management and financial planning for a broader scope of solutions.

Various studies and statistics prove that family offices investing in startups have revolutionized the venture capital industry. One survey affirms that more than 75% of family offices invest in startups directly. Doing so allows these family offices to deeply impact the ground floor of the venture ecosystem. They have enhanced the quality of the research conducted behind the scenes. It makes it possible to formulate a practical yet effective combination of strategic connections to other investors.

Assessing the Impact of COVID-19 on Investing

To say that the COVID-19 pandemic harmed the stock market and the overall strength of most investments would be an understatement. As the pandemic continues, it is increasingly difficult to assess the overall damage caused by it within the next 1-2 years.

Studies show that venture investments currently occupy 10% of most investment portfolios. Direct venture deals have skyrocketed within the realm of family offices at an exponential rate. Over half of the money allocated was for these deals, according to one published survey.

Venture portfolios generated a 14% internal rate of return within the same year. It surpassed the success rates of real estate, public equities, and other asset categories. However, accessibility to compelling management teams will remain a challenge for the foreseeable future.

Positive Projections Shine a Bright Light on Family Offices

Early-stage investments are projected to push the boundaries in the coming years. For instance, most experts expect valuations to receive a considerable amount of pressure from market condition changes. Besides, new opportunities emerging within those markets will generate even bigger returns. One study estimates that the highest returns within the next ten years will come from emerging management teams instead of established agencies.

With the next-generation of younger family members getting more involved, this paves the path for even more venture investment growth in the years to come. The straightforward approach and innovative nature of ventures statistically pique their curiosity and interest more than public companies. Even though VC investing will likely remain in portfolios, direct investing will increase in its overall prominence. Startups and entrepreneurs often look for an opportunity to pitch their business ideas to family offices and other investors for raising seed and growth-stage capital. Organizations like KiwiTech facilitate entrepreneurs to directly connect with family offices, angel investors, and others through various events hosted by them.