Family Office Investments: What to expect?

Out of the many funding options available to Startups and SMEs, Family Offices were one of the most untapped investor community which have off late gained significance. But are the investment houses that easy to find and approach? One would have to do a thorough study on the focus industry prior to approaching such investor community.

To break it down further, ultra-high-net-worth (UHNW) Families, carve out a division / department / separate company that works like a quasi-wealth+ management firm for the family. The job of this division is:

  1. Understanding the needs of the family / business and basis which an asset allocation could be decided. This could include:
    • Liquidity expectations
    • Risk/Return expectations
    • Understanding current tax structures basis which investments could be suggested.
    • Current family structures and future requirements
  2. Designing an IPS or investment constitution for the treasury. This could be designed to be a broad framework or could be worked to dig deep working to granularity.
  3. Setting up systems so as to track these investments
  4. Reporting
  5. Auditing

These setups could be broken down into 2 types:

  1. SFO:       Eg: Catamaran (SFO of Mr. Narayan Murthy of Infosys)
  2. MFO:     Eg: Various wealth management firms having their FO divisions.

For families/ Cos having corpuses in excess of Rs. 500 Crs and building, it pays to have their SFO (inhouse or outsourced) as MFOs generally tend to have their vested interest in advising instruments for deployment of excess funds. SFOs on the other hand tend to have set of professionals who work directly or indirectly only for the family interest and aren’t part of the distribution setup. SFO in turn work with many MFO setups / advisors to bring the best to the family as per their IPS / requirements.

Be a part of the legacy!

Speaking of individually held or in-house family offices, Startups can find themselves benefiting from the domain expertise bought in from the members who have served their line of business for ages and have had their skin in the game. Their advisory may include valuable dos and don’ts to help scale up your business. Though they may seem to be very discrete about their investments, and not flaunt it more often, one will find added advantage from the network and business houses they are connected with which further strengthens the founder’s business.

Entering the race

It has been noticed from previously held studies, that a number of family offices have pulled up their socks with the fear of missing out (FOMO)and have accelerated the focus on Startups. With Technology moving at brisk pace, western world caught its fancy of newer businesses and newer avatars of older businesses. Taking cue from the success of these investments in last couple of decades, Indian rich families have also caught fancy in Startup investing. Today OLA, Flipkart, Snapdeal, Byju and many more are household names.

Bucketing the Evergreen Capital

Allocating capital into funds specific for investing in other ventures is more of a structured approach that families follow. Though there can still be offices which may re-structure the landscape depending on the opportunities at hand. Startups need to be sharp shooters not just in targeting the right investors but also in having an impeccable model at hand.

DNA and more

They are known more for taking concentrated risk-based approach opposed to a diversify and avoid risk concentration approach. Having said that families invest in businesses direct in line of their existing businesses, or in businesses they can relate their professional experience to, there can be many times where they rely on various investment bodies which provide them with a set of diversified opportunities which may be from other industries where they will need assistance right from picking appropriate deals to mapping out the business viability.

One Stop… One Solution… MergerDomo

You may begin to wonder again how and where you’ll find the right point of contact to get your pitch deck up and running in the conference room of a family office. And just like many of these lingering questions there is one simple solution to it – MergerDomo can help you bridge the gap and introduce you to a large set of investors including family offices with proven history of backing the startup ecosystem.

So, hop on and register with us to explore more!

Authored by
Rosy Fernandes
(Relationship Manager, MergerDomo)

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