Today we’re seeing a rapid rise in the popularity of family office investments as an alternative to venture capital. With this comes a new generation of entrepreneurs and startups who are often looking for far more from their investors than just investment capital.
These individuals, organizations and groups are interviewing investors as much as investors are interviewing them. The business of it all extends beyond financial objectives to softer factors such as shared chemistry, values, aligned visions and transparency. All of this to ensure not only a fit that looks good on paper but also one that adds value to both parties throughout the lifetime of the partnership.
With this shift pushing towards becoming ”the new normal” in future investment landscapes, if your family office is to continue attracting the best possible investments, it will, on various levels, need to up its game. Here are three tips to consider when contemplating how to do just that.
1. Be clearly positioned
When it comes to investments, it’s essential to be top-of-mind when people are considering to whom to offer their opportunities. For this reason, it helps to ensure that your family and family office occupies a clear positioning within the industry or focus area ‘you’d like to operate.
One way to approach this is by starting with a clearly defined purpose – what do you want to achieve that’s greater than just profit? From there define your unique assets, this will help highlight what it is that makes you great and will help you to articulate to investment seekers why ‘you’d be an asset.
There’s also great power in knowing what you’re not. It may often be quite difficult to define exactly who you are or what you stand for. However, it’s a lot easier to know what you’re not, or where you don’t want to go. Start with what you’re not and slowly work on defining positioning that is most appealing and attractive to you and your family.
2. Continually build your pipeline
Building an opportunity and deal flow pipeline is becoming increasingly important, building a quality one, even more so. If your family is looking to increase its allocations for direct and alternative investments, it’s up to you to identify and attract the best-suited opportunities.
To do this, ‘it’s essential to review enough deals to give you perspective on which ones are the most attractive to your organization and why. From there, you can select the best among them to pursue.
While trusted industry advisors will always have an integral role to play in deal flow, ‘it’s also prudent to think outside of the box when it comes to investment lead generation and talent spotting. This not only holds for building an investment pipeline but can also be applied to other pipelines like HR, philanthropy, and more.
In order to build a quality pipeline, there are several avenues you may choose to explore. One way is to apply “growth hacking” techniques to your deal flow by making use of cold-outreach emails and automated lead nurturing. Alon Lichtenstein, a top-funnel expert, says, “By using a system that can take care of the manual work, investors can focus on the leads that are pre-qualified and ready.” Digital cold outreach has been around for ages; however, it still sees some reasonable success rates, especially in northern Europe.
If you prefer a more engaged approach, you can actively build personal networks within the industries ‘you’re interested in by attending conferences and events or actively keep your eyes open for promising startups, even when ‘they’re in their infancy and follow their progression over time, as they may be worthy of direct investment as they grow.
Alternatively, you may consider equity crowdfunding opportunities, and if these are of interest, visit one of the various online platforms like SeedInvest, Peerbackers, Kickstarter, or AngelList that facilitate these. When dealing with these platforms, accredited investors receive information on the deals being offered and are privy to how much is being raised and on what terms.
You could also look at joining angel investor networks and syndicates or impact investment funds. Or, if it interests you and you have the capacity for larger-scale projects, you could even develop a program in-house that utilizes a peer selection model and invite interested investment seekers to compete for a funding prize.
The possibilities are endless. Again, how you build your pipeline will come down to what ‘you’re looking for in an investment opportunity.
3. Actively build and manage your reputation
To compete with banks, private equity funds and other family offices to attract the best deal flow, your family office needs to ensure that it is actively building and managing its reputation. Be it through ongoing connections to different families, attending the right meetings and events or communicating what moves your family.
When the narrative surrounding your ‘family’s entrepreneurial roots, experiences, values, vision and missions is managed and communicated effectively, it can have a profound impact, resonating with the founders and management teams of organizations seeking capital.
With the investment landscape changing, your family office needs to be more than just a source of capital. It needs to be clearly positioned in the selected industries or areas of influence and actively manage its reputation and narrative to be the most obvious and sought after choice among investment seekers. In this way, ‘you’ll stay ahead of the game in attracting the best possible investment opportunities.