Lifting the Lid on Family Offices

Family offices are private firms that manage investments, financial planning, charitable giving and other affairs for wealthy families and individuals. Over the last several years, the number of family offices has steadily increased, which is largely due to the benefits they provide to ultra-high-net-worth families, including more investment flexibility across asset classes and the ability to advance families’ longer-term vision and goals.

Because of these benefits, family offices have also evolved into more active participants in the investment ecosystem. Specifically, they’ve become valuable partners for entrepreneurs and can support business owners and leaders in ways that traditional capital providers cannot. Unlike venture capital (VC) firms, they don’t have limited partners (LPs) to report back to, which allows them to offer a wider variety of financing options and a broader array of value they can bring beyond capital.

However, while family offices can unlock more opportunities for businesses, they are also typically more private and discreet compared to other investment firms, making it challenging for entrepreneurs to pitch and build relationships with family office leaders.

To find out what’s different about deal-making with family offices, we sat down with Sara Balawajder, Vice President of impact investing at Builders Vision, an impact platform that began as the family office of Lukas Walton.

Finding and connecting with family offices

Family offices generally don’t have public facing websites and won’t advertise to you in the way a fund might, so they can be hard to find. However, there are still some tactics you can use to get in front of them.

Try impact collectives – These networks are where family offices and other investors come together to discuss market trends and source transactions, but they can also act as a filtering mechanism between entrepreneurs and prospective sources of capital. Examples within the climate space include Creo and Toniic (learn more about these here). Groups like this often have a focus on inclusion, so they can be especially good at supporting underrepresented founders, who have historically lacked access to the capital, insights, and resources needed to grow their businesses.

Find opportunities through their foundations – If you don’t mind doing some detective work, one way to get in touch with family offices is through their private foundations. Many foundations list supporting small businesses or advancing career development as a key focus area and will offer grants to entrepreneurs who fit their criteria. These foundations are required to publicize their grantmaking, so if you see alignment between your business and their investment dollars, you can follow the trail and start to build relationships.

Go through their funds – Most family offices aren't just doing direct investing - they're also allocating capital to fund managers (aka VCs). If you already have some capital backing, you can approach your VC and ask if their LPs include any family offices that they’d be able to introduce you to.

Attend industry conferences– Investment professionals - as well as VCs - are often present at industry conferences, so attending these events is a great way to rub shoulders with family office investors. A few examples where family offices are often present include: SOCAP, Verge, GIIN, and Ceres, as well as sector specific gatherings or conferences (think, Ag events, etc).

Leverage your founder network – Ask other entrepreneurs if they have any family office investors – they may be able to guide you in the right direction.

Tips for engaging with family offices

1. Be authentic

When you’re pitching a VC, you’ll have a clear idea of their investment criteria and mold your story in a way that you know will appeal to them. Family offices require a different approach. More likely than not, you won’t be certain what their priorities are and what they’re looking for. The best way to position yourself for success is by asking questions about goals and incentives up front, stating a clear value proposition, and being genuine. From there, they will decide whether your company aligns with their overall vision, and you can build on that.

2. Understand their process

Family offices are set up in different ways, so spend time to make sure you’re as informed as possible about their specific dynamics of the office you’re looking to build a relationship with. It can be difficult to dig up information on family offices– some have websites, while others fly very much under the radar. More often than not, networking your way to information is the best course of action. You’ll also want to have an upfront conversation about process and find out who the ultimate decision maker is – whether it’s the investment committee or the family/principal.

3. Ask how you can help them

Ultimately, no matter who makes the decision, at some point, it will be out of your hands, but there are steps you can take to boost your chances. You can ask your point of contact for details on where the process typically falls apart, and what you can do to avoid failure. Arm them with all of the information they need to have a fruitful conversation with their investment committee, and check in as regularly as possible. Try to toe the fine line between being proactive and bothersome.

Some potential questions to ask are:

• What information can I share about my business that will get your team excited?
• What concerns do you anticipate the team having about my business?
• What performance metrics are important to your team that I should highlight?

Each family office may have their own set of diligence questions or frameworks they will need to answer to get comfortable with making an investment. It is particularly important to understand how they think about impact vs. financial return (if an impact investment organization) and where you might fit into their spectrum.

4. Get clarity on the post-investment relationship

During the conversation, you should also be interviewing the family office to make sure they’re the right partners for you. Different family offices will choose to engage post-investment in various ways– some will expect a deeper relationship than you’d have with an average institutional investor, others won’t. It’s important to get clarity on what they want this to look like, and whether it suits you.

And remember, the relationship goes both ways. Make sure to ask your point of contact how you can be more engaged as a partner– maybe there are ways you can support their broader efforts outside of their investment portfolio which can help you build a deeper relationship. And, in a relationship game, depth is what counts.

Sara Balawajder is a Vice President on Builders Initiative Investment Team, where she helps manage the Foundation Endowment, working to allocate 90%+ of the portfolio to mission-related investments across asset classes. She also leads impact investments for the Donor Advised Funds, seeking out under-represented emerging fund managers dedicated to impact. Additionally, Sara oversees investments for the Firm’s impact-first sustainable food and agriculture portfolio. Her strategy makes investments utilizing early-stage direct equity checks, creative debt financing, and fund structures to facilitate the adoption of technology that support a food system that affords healthy food to all and restores the environment rather than harming it.