What role do family offices play in growth financing?

Family offices are parti­cu­larly rele­vant for the later finan­cing phases of growth compa­nies. For once, other insti­tu­tio­nal inves­tors are parti­cu­larly under­re­pre­sen­ted in Europe at this stage of deve­lo­p­ment. In the U.S., for every dollar inves­ted in the early stages, over $3 is inves­ted in later stages. In Europe, this ratio is only 1 to 1. Accor­din­gly, the oppor­tu­ni­ties in later phases are greater.

On the other hand, the barriers to entry in the form of good access to the rele­vant deal flow are dispro­por­tio­na­tely smal­ler in the late phase. The number of promi­sing targets is only 5–10% of the rele­vant early-stage volume. The poten­tial target compa­nies are alre­ady active and visi­ble on the market. An active approach is possi­ble in prin­ci­ple, while early-stage inves­tors depend to a good extent on being approa­ched in good time by the rele­vant entre­pre­neurs. For this, a certain aware­ness of the inves­tor brand and a good repu­ta­tion are important. Howe­ver, this contra­dicts the wide­spread philo­so­phy of family offices to rather act from the background.

Some family offices have chosen to be active in the early stage as well. In this case, I observe an exten­sive alignment of struc­tures with those of inde­pen­dent early-stage venture capi­tal funds. The family office beco­mes the sole “LP” (funder) of an early-stage fund mana­ged by a profes­sio­nal team of early-stage inves­tors. This team is gene­rally incen­ti­vi­zed in line with the market and can act rela­tively freely. Typi­cally, there are only a few speci­fi­ca­ti­ons regar­ding the invest­ment stra­tegy, which aim to ensure the compa­ti­bi­lity of the early-stage invest­ments with the other acti­vi­ties of the family office or family. For this purpose, the family office often reser­ves the final invest­ment decis­ion by leading the invest­ment commit­tee. Compared to inde­pen­dent venture capi­tal funds, these family office funds have the advan­tage of hardly having to spend any time on fund­rai­sing and can ther­e­fore concen­trate fully on port­fo­lio work. In addi­tion, it is often possi­ble to access know-how from other acti­vi­ties of the family office or the family, which can create synergies.

I believe that the presence of family offices in the area of growth finan­cing will conti­nue to increase. — Firstly, because the pros­pects for returns conti­nue to increase as a result of acce­le­ra­ting tech­no­lo­gi­cal inno­va­tion, while they remain under pres­sure in other areas. Secondly, because family offices are funda­men­tally well suited for invest­ments in growth compa­nies, which are gene­rally desi­gned for the long term, for the reasons mentio­ned above.