How and why Family offices are disrupting the private equity and venture capital industries
Trend toward institutionalization.
Family offices is a brand new industry: 69% of all family offices started after 2000. Only 3-5% of family offices are institutionalized. The rest are mostly fragmented, inefficient and silos. The situation is changing rapidly. In 5-10 years the largest and most efficient family offices are going to comete and become as well known as Blackstone’s and KKR’s of the world
Alignment of interest.
In general, Venture capital and Private equity have bastardized the business, turning investment into an AUM game. That is where Family offices are stepping in with the “patient capital”. They don’t have to turn capital every 2-3 years. Moving forward more and more people will be able to invest alongside Family offices
Most of the family offices have made their money by doing something. In order to create true alfa, you need to be able to operate. And that’s where the Family offices are making huge difference
Serving the broader economy.
You can’t run a philanthropy or a charity like a business, but you can run it more business like. The families like Michael Bloomberg or Michael Dell have made a tremendous amount of wealth and they will use their skills to solve some of the real world problems
The first thing, the second and the third thing the Family offices want to know if they can trust this person rather than the track records. It is more about the personal trust. It is much a relationship business
Family offices conferences.
Service providers speaking with service providers. A lot of family offices don’t attend. Not the most efficient model.
Attracting the talents.
Family offices need to solve that problem in order to compete with the Blackstone’s of the world. Fair compensation for the non-family members is becoming the key for success
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