In a trend that we continue to see here at Cap Hedge Ventures via our FINTRX Platform, family offices are greatly increasing their direct investment activity. There are currently more than 3,000 family offices globally managing money for the world's wealthiest families. While many of these family offices are becoming an important source of capital for private companies, they can be incredibly secretive to protect the confidentiality of the families they represent and the proprietary nature of their deal flow.
What is the difference in fund structure between family offices and VCs? One of the biggest differences is that family offices do not have the external capital raise demands nor are they unnecessarily looking to force exits at inopportune times that are characteristic in the VC model when managers are winding down the fund.
Seeing family offices do not have multiple LPs to answer to with wide ranging objectives and demands, they have the patient capital to allow companies to develop and ferment. This also manifests itself in how deals are sourced. Family offices don’t adopt a spray and pray approach to investing but rather look to identify potentially lucrative and disruptive opportunities and then concentrate on these opportunities with surgical focus, providing advice, strategic introductions, and capital beyond early-stage investing.
The single and multi family office world is rapidly becoming an important source of capital for private companies, either as a standalone funding source, or in a complementary partnership with other investors, VCs, and institutional capital providers. If your company has the right combination of strategic vision and sound management, then the family office may be the best partner for equity investment.