family office monthly
TRANSCRIPT
Welcome to the January edition of Family Office Monthly. We have compiled a numberof great articles and resources for this month’s edition. We are already filling up our
annual Single Family Office Super Summit, hosted at the Edison Ballroom in New York City on February 25th, 2016 so let us know if you are interested in attending or speaking as a family office.
Beyond the events, we hope you access our extensive family office resources such as Family Office Monthly, database solutions, family office training programs, webinars, and more. If you would like to learn more about how we can work with you and your family office, please contact our client services specialists at [email protected] and by phone (212) 729-5067.
FAMILY OFFICE MONTHLYJanuary 2016
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Premji Family Office Leads $90m Anaplan Round The family office for Azim Premji, Chair-man of Wipro, led a $90-million fundraising round for enterprise planning cloud company, Anaplan. This round has now raised Anaplan’s valuation to $1B+ and the company joins the ranks of other so-called “unicorns.” ... Page 2
Why use a Private Jet for your Family Office business?Award winning pilot, Captain Jerry Perelman, explains how competitively priced Private Jets and other aircraft can increase productivity, expand business meeting scheduling, and be very cost effective... Page 3
A Look Inside the Single Family OfficeI’ve met with more than 1,000 single family offices around the world over my career and I interviewed dozens to inform the Single Fami-ly Office Book. For those who don’t meet with many single family offices, ... Page 4
Pritzker Group, Other Family Offices Eschew Private Equity Firms to Go Direct As if we needed further evidence that family offices are increasingly going direct instead of investing only through private equity funds, Mergers & Acquisitions released a profile of several family offices embodying this ... Page 5
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If you want to listen to one of the interviews included in this book, visit SingleFamilyOffices.com/audio2 to download a free mp3 recording.
Looking to meet other single family offices in person? The Family Offices Club hosts many live conferences through-out the year in great locations like Manhattan, Singapore, and Miami. At least once a year, we host an exclusive gathering for single family offices and affluent families to meet, share experi-ences, and build relationships.
If you would like to be con-sidered for membership (free to single family offices) please contact us:
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2 | Family Office Monthly
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“The round also saw participation from other investors like Baillie Gifford, Founders Circle Capital, Harmony Partners and existing Anaplan investors like Salesforce, Coatue Management, Shasta Ventures and Granite Ventures among others.
“Premji Invest is thrilled to lead this investment round because we have seen a broad range of companies around the world transform their businesses with Anaplan’s agile planning and modeling platform,” said Sandesh Patnam, partner and lead US investor, at Premji Invest. “Anaplan is a game changer because it enables companies to not only make processes faster and easier, but also fundamentally change the way their people work and make decisions.”
Premji Invest which started focusing on US deals after hiring Patnam in March 2014, had earlier led a $80-million funding in Cyanogen and backed US-based subscription billing startup Zuora in March 2015. It also led a $82 million funding in field service solution company Service-Max in August 2015.”1
2015 saw a wave of new members of the unicorn club and it is interesting to see a family office leading a group of established strategic and institutional investors in this primary round.
1. Economic Times of India. Azim Premji’s family office leads $90-million funding into US-based cloud firm Anaplan. January 15th, 2016. http://articles.economictimes.indiatimes.com/2016-01-15/news/69794022_1_premji-invest-sandesh-pat-nam-wipro-chairman-azim-premji
The family office for A im Premji, Chairman of Wipro, led a $90-million fundraising round for enterprise planning cloud company, Anaplan. This round has now raised Anaplan’s valuation to $1B+ and the company joins the ranks of other so-called “unicorns.” Mr. Premji has amassed a net worth estimated by Forbes and Bloomberg to be more than $14 billion through his ventures in the IT Industry.
PREMJI FAMILY OFFICE LEADS $90M ANAPLAN ROUND
FEBRUARY WEBINAR: BILLIONAIRE REPUTATION MANAGEMENT
Our next webinar is an educationalpresentation on billionaire repu-
tation management. You can attend that webinar for free as a Charter Member or register to attend here: http://Fami-lyOffices.com/Webinars. Members can also access dozens of hours of content through our webinar recording library.
We’re covering all the important family office issues in Charter Member webi-nars, the upcoming annual Single Family Office Summit, and through educational resources like Family Office Monthly so be sure to receive the latest by joining the Family Office Club: http://FamilyOffic-es.com/Association
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WHEELS UP!
An average-sized family office team consists of a CEO (often a family member), a CIO, and one to two analysts or associate level team members. In this case, the day-to-day activities include:
Ensuring that the business of the single family office is being taken care of, employee issues are resolved, the business is stable, cash on hand is adequate for payroll, etc. These are small issues, but they can chew up a lot of time as the investments grow more complex and the team expands.
Looking at incoming deal flow, fund manager pitches, direct deals, etc. At well-known single family offices, staff must coordinate and prioritize relationships amid a constant flow of in-person meetings, a bloated email inbox, and a seemingly endless barrage of phone calls. To manage the chaos, you will have to implement processes to quickly evaluate the opportunity, deflect those deemed to be wastes of time, and have junior analysts screen the promising deals.
Conducting in-depth due diligence. This means following a due diligence process aimed at ensuring that any fund manager selected or investment made fits within the family mandate and meets the family and CIO’s criteria. This is critical to avoid frauds, underperforming fund managers, and wild goose chases running after poorly structured investment banking deals.
Monitoring the markets and portfolio. The degree of work here will vary based on how closely the family is involved in directly investing in the public markets or other liquid securities. Monitoring direct investments, real estate, and private equity funds is also a component of the total portfolio monitoring activity. However, direct investments rarely require daily attention, unless the family office has employed a Chief Direct Investment Officer (CDIO) to cover that area.
Speaking with other family offices and investors with similar investment portfolios and challenges, and sharing best practices with others. If this activity is ignored, then the team will grow stale and they will be slow to respond and take tactical moves to defend the portfolio.
Creating documentation and reports needed for accounting and taxation purposes. Additionally, single family offices prepare a weekly, monthly, or quarterly report to send to the family. Often times, this reporting process is complex and requires expensive or custom-built software solutions to capture an accurate picture of where the money is invested right now and what those investments are worth.
Coordinating with outside tax, insurance, risk management, or investment consultants on specific transactions on the horizon, pending legal agreements, or private placement opportunities being considered.
Creating reports and working with reporting systems to communicate investment returns to stakeholders in the single family office.
If you want to learn more about how single family offices operate, we’re hosting a conference on February 25th, the annual Single Family Office Summit in NYC: http://FamilyOffices.com/SFO
A LOOK INSIDE THE SINGLE FAMILY OFFICE
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I’ve met with more than 1,000 single family offices around the world over my career and I interviewed dozens to inform the Single Family Office Book. For those who don’t meet with many single family office , there is always a bit of mystique over how these firms operate and what the typical day-to-day is for a single family office - so I wanted to share my thoughts on this topic.
Richard C. WilsonCEO & FounderFamily Office [email protected] Harbor Drive #76Key Biscayne FL 33149http://FamilyOffices.com
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Pritzker Group, a family office that we’ve reported on in Family Office Monthly and whose representatives you may have seen at our family office conferences, is well known for its preference to invest directly.
Paul Carbone, a managing partner at Pritzker Group, told The Middle Market’s Danielle Fugazy: “Family offices are staffing up their capabilities to invest directly. There is evidence to suggest that this is where a number of family offices are headed.”
THE PRITZKERSWhen professionals in the industry reflect on the family office direct investing model, the Pritzker Group is at the forefront. However, the Pritzker Group does not like to be categorized as a family office. The firm feels the term is too broad and that it includes family offices that look nothing like the Pritzker Group.
The firm prefers to be thought of as an investment company, and why shouldn’t it be? The Chicago firm boasts a venture capital investment business, an asset management business and a private capital business, along with 21 investment and operating professionals.
CARETTA PARTNERSCaretta’s family office model is already resonating with certain types of companies and people.“If the owners want to stay on or care about their legacy, they are interested in what Caretta is offering,” says Becker.
“There’s stability to what we offer and a genuine caring about the leadership team. I didn’t really know what it would be like to do this, but the model is validated already.There are more deals to look at than I have capacity for.”
GRAND CROSSING CAPITAL PARTNERS
The Everglades deal represents a typical transaction for Grand Crossing. The firm is funded by the family behind the Wilton Brands, a company founded in 1929 best known for decorating cakes. In 2007, Wilton Industries merged with EK Success, Dimensions Holdings LLC and K&Company, creating Wilton Brands, a large, diversified company in the craft industry owned by PE firm TowerBrook Capital Partners.
Grand Crossing invests between $5 million and $25 million of growth capital in control and minority stakes. The firm requires that portfolio companies be profitable and generate between $2 million and $10 million of Ebitda.
ISLAND MANAGEMENTHoward Romanow is a good example of why family offices are able to compete for deals directly. Formerly of FDG Associates, Romanow now serves as COO and CFO of Island Management LLC, a Darien, Connecticut-based firm that invests in private companies on behalf of an unnamed family that made its wealth in consumer products. Romanow likes that now he no longer has “to worry about where the capital comes from.”
For the full profiles and article be sure to read this great story from Mergers & Acquisitions. We’ll be reaching out to these family offices to participate in our upcoming annual Family Office Direct Investment & Deal Flow conference.
Fugazy, Danielle. “Pritzker Group and Other Family Offices Skip PE Firms to Invest Directly.” Mergers & Acquisitions. http://www.themiddlemarket.com/news/financial_sponsors/pritzker-group-and-other-family-offices-skip-pe-firms-to-invest-directly-259547-1.html
PRITZKER GROUP, OTHER FAMILY OFFICES ESCHEW PRIVATE EQUITY FIRMS TO GO DIRECT
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As if we needed further evidence that family offices are increasingly going direct instead of investing only through private equity funds, Mergers & Acquisitions released a profile of several family offices embodying this trend.
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E-Mail: [email protected] (212) 729-5067
OCTAGON CAPITAL FOLLOWS OTHER HEDGE FUNDS TO CONVERT TO FAMILY OFFICE
For the executives running Octagon Capital, it hasbeen quite a journey from their days at Government
of Singapore Investment Corp., where the founders Lam Poh Min and Nelson Chia previously traded equities for the sovereign wealth fund.
The two launched Octagon Capital in 2004 with $692,000 and saw assets grow to exceed $400 million but has since struggled along with other hedge fund peers. To complete the journey, Bloomberg reported that Lam told investors this month that Octagon is returning capital to investors and converting to a family office.
Octagon Capital Management Pte, a hedge-fund firm started by former Government of Singapore Investment Corp. executives, will return all client money in its two funds and convert to a family office, joining a rising number of managers going back to running in-house capital.
Investors will receive their money early next month, co-founder Lam Poh Min said in an instant message exchange from
Singapore. Lam and other Octagon Capital executives are meeting with investors this week, he said. The firm will continue to manage the quantitative equity fund with executives’ and partners’ money, as well as capital from friends and family, Lam said.
“We believe it’s time to move on,” Lam said. “Hedge funds are going back to their roots, and I’m certain this trend will continue,” he said, referring to firms returning outside capital to focus on managing their own money.1
Like we reported in last month’s edition, this is becoming a common exit for hedge funds that want to avoid the challenges of running a fund for outside investors, including regulatory scrutiny and filings, quarterly withdrawals, and investor pressures
1. Waite, Suzy. “Returning Outside Money to Run Family Office.”Bloomberg. http://www.bloomberg.com/news/articles/2016-01-14/hedge-fund-octagon-returning-outside-money-to-run-family-office
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SINGLE FAMILY OFFICE MANAGEMENTAt Single Family Office Management, we provide hands-on assistance in launching, managing, and improving your single family office.
If you are seeking help forming a single family office or want expert support for your existing family office, visit http://SingleFamilyOffices.com or call (503) 922-1811 to speak with an ex-perienced single family office advisor.
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COHEN FAMILY OFFICE CONSIDERS WEIGHS RAISING OUTSIDE CAPITAL AFTER TWO-YEAR BAN
Steven Cohen, the famous billionaire founder of SAC Capital opened Point72 as a family office to manage his ample capital along with other select investors allowed under the family office exemption. That decision to ebrand as Point72 and operate as a family office has, of course, largely driven by the Securities and Exchange Commission’s investigation into SAC Capital and the alleged insider trading done by the firm.
That investigation resulted in a two-year ban fromthe securities industry for Mr. Cohen but he did not
sit by idly for two years; rather, his new firm Point72 employs 950 people, continues to actively trade the fam-ily’s book, and just recently opened an office in London on St. James Square—a move that some are interpreting as a step toward managing external capital again.
If Point72 does indeed decide to revert to an investment firm managing external money once the ban expires, it might be the most high-profile example of multi-bil-lion-dollar family office converting to a traditional asset manager.
Yet Point72 President Doug Haynes was quick to pump the brakes on such speculation, telling the press that the office was part of a focus on internal talent growth and expansion of global capabilities, as reported by Chief Investment Officer:
Point72—now a family office—will focus on talent develop-ment and growing its internal assets, President Doug Haynes said in a London press briefing yesterday.
“We must continue to do business at the highest ethical and professional levels and in a way that is fully transparent to our regulators, counterparties, future employees, and potential future investors.” The company has reopened its London office and
plans to hire a number of analysts, researchers, and portfolio managers to rebuild its European capability, Haynes added.
The office, on St James’ Square in the UK capital’s West End, has “six or seven” investment professionals working in it already, according to Haynes, with capacity for between 50 and 70.
The firm had not settled on a ratio of investment professionals to support staff, nor how quickly the vacancies would be filled, its president continued. “The amount will be dictated by the talent.”1
Whatever the reasons, we’ve seen a number of high pro-file money managers decide to return capital and many are setting up as a family office, including John Thaler of JAT Capital, Michael Platt of BlueCrest, Stanley Druckenmiller, and the aforementioned legend George Soros.
It will be interesting to see how these family offices fare and whether they will continue to struggle in today’s trading environment.
1.“Cohen Builds Out Family Office, Eyeing Possible Return.” CIO. http://www.ai-cio.com/channel/REGULATION,-LEGAL/Co-hen-Builds-Out-Family-Office,-Eyeing-Possible-Return/
E-Mail: [email protected] (212) 729-5067
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WHAT BUSINESS THE WINNERS OF THE POWERBALL JACKPOT NEED TO START NOW
The country and much of the world was captivat-ed earlier this month by the Powerball prize that
exceeded $1 billion in potential winnings for some lucky player. For financial advisers and those accustomed to managing such large sums of wealth, the question was not how to spend those dollars, but how to protect the fortune for future generations.
With the next Powerball drawing at 10:59 p.m. tonight in New York, a single winner who opts to take the lump sum would see about $930 million in cash, according to yesterday’s estimate. Federal, state and local government taxes could cut that almost in half, but may still leave half a billion dollars to play with. That would catapult a winner into the world of those with family offices, a level many star athletes and celebri-ties never reach.
Richard C. Wilson, CEO of the Miami Family Office and owner of the Family Office Club (which produces this publication) was quoted in a recent story explaining what the winner(s) would need to manage the windfall.
Starting a family office isn’t cheap. Median pay for CEOs at family offices is in the mid-six-figures, according to a
2015 study by Fidelity Investments. Many family offices pay $20,000 to $100,000 for the technology and software needed to track spending, taxes, investments and properties, and report back to family members, according to Richard C. Wilson, chief executive officer at the Miami Family Office, which serves a family that has more than $500 million in real estate assets.1
While far from a common path to launching a fam-ily office, it was an interesting quandary for aspiring multi-millionaires and advisors alike.1. Collins, Margaret. “The Business You Need to Start When You Win the Powerball Jackpot.” Bloomberg. January 13, 2016. http://www.bloomberg.com/news/articles/2016-01-13/powerball-winner-may-get-rare-peek-into-world-of-family-offices
Abbot Downing, a unit of Wells Faro specializing in serv-ing ultra-high-net-worth families, has named Joe Freeman to direct the company’s Family Office Services.
Mr. Freeman will coordinate across the family office services offered by Wells Fargo to ensure family office clients are fully aware of the bank’s capabilities.
Freeman most recently led the mid-Atlantic Abbot Downing practice for five years, overseeing a team of relationship managers, planners, private bankers and investment specialists. The 25-year veteran of Wells Fargo previously served as a relationship manager, investment strategist and trust officer.
“Whether family offices need treasury management, private banking or insurance solutions, we want to make it easy for them to navigate across Wells Fargo,” Jim Steiner, president of Abbot Downing, said in a statement. “As family offices become increasingly sophisti-cated, they can also benefit from Wells Fargo’s pre-IPO investing or international services.” 1
Abbot Downing manages upwards of $38 billion in AUM and was listed in Bloomberg’s 50 Richest Family Offices.
1. Correia, Margarida. “Abbot Downing Names Leader of Family Of-fice Services.” Bank Investment Consultant. January 22, 2016. http://www.bankinvestmentconsultant.com/news/industry/abbot-down-ing-names-leader-of-family-office-services-2695482-1.html
ABBOT DOWNING APPOINTS FAMILY OFFICE SERVICES DIRECTOR
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Like many ultra-wealthy individuals, Mr. Cohen is anavid buyer and seller of art. He bought an Andy
Warhol portrait of Mao Zedong for $17 million in 2007 and flipped it in a sale last year for more than $47 million. Mr. Cohen has also secured loans in the past to finance art acquisitions.
For other ultra-wealthy families, this presents an interest-ing opportunity to secure loans using existing assets (as-set-backed loans), as many families already do with yacht, jewelry, jets, etc. Banks appear to be more willing to work with families and offer financing based on profession-ally-appraised assets, instead of simply relying on more traditional forms of collateral.
At the end of last year, Morgan Stanley’s private bank arranged a personal loan of an unspecified sum for Mr. Cohen. The loan is secured by “artwork collateral pieces” and related documents, according to a filing with the Connecticut secretary of state’s office.
It is not uncommon for wealthy art collectors to take out multiple lines of credit to fund purchases. In the past, Mr. Cohen, 59,
has used similar personal loans from Deutsche Bank and other Wall Street banks to finance and defray the cost of some of his big art purchases, which have included works by Jeff Koons, Damien Hirst, Alberto Giacometti and Pablo Picasso. It is estimated that his art collection is worth about $1 billion.
Two years ago, Goldman Sachs provided Mr. Cohen with a line of credit after Deutsche Bank decided not to continue a personal loan it made to him in 2009.1
At the end of this year, we’ll once again be hosting the Family Office Super Summit in Miami (www.FamilyOffic-es.com/Super). We are timing it again to line up with Art Basel because we recognize that art collection (and even art as an investment) is an important activity for afflu-ent families and family offices. We’ll have to see if Mr. Cohen makes a splash with a big buy at Art Basel Miami this year.
1. Goldstein, Matthew. “Morgan Stanley Provides Billionaire Steven Cohen with Loan Secured by Art.”
STEVE COHEN GETS A LOAN BACKED BY HIS ART
Steven Cohen, whom we have already mentioned in this edition, made headlines for another reason beyond his family office opening of a London office: the billionaire investor reportedly received a loan from Morgan Stanley’s Private Bank using his artworks as collateral.
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30+ JOB OPENINGS IN THE FAMILY OFFICE INDUSTRY
Wealth Strategist Los Angeles, CA Top Tier National Wealth Management Firm seeks Wealth Strategist to work with HNW and UHNW clientele (10mm-500mm+) regarding sophisticated tax and estate planning strategies…
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Succession Plan for Retiring Tax Partner Northern, CA Boutique Accounting Firm seeks HNW Accountant to lead client engagements. Manage the process of preparation and review of individual, estate and trust tax returns…
Senior Planning Strategist Northern, CA Top Tier National Wealth Management Firm seeks Senior Planning Strategist to advise HNW clients on sophisticated wealth planning strategies including estate planning…
Tax Director Palo Alto, CA Boutique UHNW Financial Advisory Firm seeks Tax Director to coordinate with clients and their advisors with regards to tax planning, research, compliance…
UHNW Tax Manager Palo Alto, CA Boutique UHNW Financial Advisory Firm seeks Tax Manager to review UHNW returns for individuals and family clients. Manage staff and be an internal technical resource…
Executive Assistant – Single Family Office San Francisco, CA A $500 million+ single family office in San Francisco is looking for a new executive assistant to add to the team. An ideal candidate would possess at least 7 years of experience…
Family Office CFO / Accountant San Francisco CA A single family office in San Ramon, just outside of San Francisco is looking to hire a new member to the team with at least 5 years of accounting expertise…
UHNW Tax Senior San Francisco, CA Nationally recognized UHNW Multi-Family Office in San Francisco CA seeks Tax Senior with individual tax background to review and prepare UHNW returns for individuals…
Senior Wealth Strategist San Francisco, CA Top Tier National Wealth Management Firm seeks Senior Wealth Strategist to work with HNW and UHNW clientele (10mm-500mm+) regarding sophisticated tax and…
Senior Relationship Manager San Francisco, CA Well established National Wealth Management Firm seeks Relationship Manager to lead HNW and UHNW client relationships and provide holistic, fee based investment…
Managing Director San Francisco CA Dynamic Top Tier Financial Advisory Firm in the San Francisco region with an excellent repu-tation seeks Managing Director to be responsible for leading a team, providing…
Business Development Officer Southern, CA Boutique Entrepreneurial Multi-Family Office seeks Business Development Officer to expand market reach within the Ultra High Net Worth marketplace in Southern, CA…
Wealth Strategist Denver, CO Top Tier National Wealth Management Firm seeks Wealth Strategist to work with High Net Worth (HNW) clientele regarding sophisticated tax and estate planning…
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Miami, FL op Tier Multi-National Investment Firm representing some of the largest families and high-net worth individuals inside and outside of the U.S. seeks Estate & Tax Planning Strategist…
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HNW Tax Senior Jupiter, FL Regional Public Accounting Firm in Jupiter FL seeks High Net Worth Tax Senior or Manager with individual tax background to prepare and review HNW returns…
Business Development Officer Southeast, FL Boutique Entrepreneurial Multi-Family Office seeks Business Development Officer to expand market reach within the Ultra High Net Worth marketplace in Southeast, FL…
Wealth Strategist Atlanta, GA Top Tier National Wealth Management Firm seeks Wealth Strategist to work with HNW and UHNW clientele (10mm-500mm+) regarding sophisticated tax and estate planning strategies…
Senior Relationship Manager Atlanta, GA 20B+ Private Client division of Top Tier Global Financial Services Firm seeks Senior Relation-ship Manager/Team Lead to work alongside Financial Advisor…
Senior Planning Strategist Chicago, IL Top Tier National Wealth Management Firm seeks Senior Planning Strategist to advise HNW clients on sophisticated wealth planning strategies including estate planning…
Financial Advisor Chicago, IL Boutique Registered Investment Advisory Firm seeks Financial Advisor to develop business, manage relationships, and counsel high net worth clients (1mm+ level clientele)…
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Sales Manager – Boutique RIA Southeastern, MI Boutique RIA seeks Sales Manager to lead the team of two Senior Financial Advisors and their associates in managing a pipeline of leads, generating new leads…
Single Family Office Trust Attorney Salem, NH Established Multi-Billion Single Family Office seeks Trust Attorney to act as Trust Officer with fiduciary oversight responsibility for complex trusts including…
HNW Tax Review Seniors Parsippany, NJ Multi-Billion National RIA in Parsippany seeks HNW Tax Review Seniors with individual tax background to focus on review of clients returns. Will work with…
Single Family Office Trust Attorney Reno, NV Established Multi-Billion Single Family Office seeks Trust Attorney to act as Trust Officer with fiduciary oversight responsibility for complex trusts including generation skipping…
Trust & Estates Tax Senior or Manager Garden City, NY Regional Public Accounting Firm on Long Island NY seeks Trust & Estates Tax Senior or Manager with strong fiduciary and estate tax background…
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Tax and Wealth Planning AnalystNew York City, NY Work alongside senior team members in advising high net worth clients (5mm-1B+) on sophis-
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Expatriate Tax New York City, NY Prepare returns and tax projections for UHNW clientele (5mm – 1B+) including, gross up calculations and tax equalizations…
UHNW Tax Manager New York City, NY Multi-Family Office in NYC seeks Tax Manager focusing on internal technical resource for 35+ person department. Technical review of 1040s and 709’s, extensive…
Senior Client Advisor New York City, NY Boutique Wealth Management Firm seeks Senior Client Advisor with strong HNW tax back-ground to advise clients with regards to tax review, tax compliance,…
Relationship Manager Pittsburgh, PA Top Tier Multi-Family Office seeks Business Development Officer to lead the overall expan-sion efforts of the firm. Strong emphasis on collaborating with internal…
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You can apply for any of these positions at FamilyOfficeJobs.com
(212) 729-5067
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FAMILY OFFICES AS A FINANCING SOURCE FOR ENTREPRENEURS
For small and mid-sized companies, it is often difficult to source capital. The available avenues for financing are largely limited to traditional banks, private investment funds like VC or private equity, or the public markets. Increasingly, we’re seeing family offices fill the funding void for entrepreneurs looking to grow their business. Yet, many entrepreneurs still overlook family offices as a source of capital.
Sharon Hadary, an author, professor, and a founding director of the Center for Women’s Business Research, has written a helpful piece in the Wall Street Journal on this topic. In her column, Ms. Hadary explains the bene-fits of working with family offices (and the challenges.)
For entrepreneurs, there are many benefits to getting capital from a family office. Family offices have much more flexibility than most other sources of private equity. They have no rules or restrictions about what they can do with their money…
…Because many families have experience with growing aprivately held business, they understand the challenges the entrepreneur faces and recognize that it takes time to grow a business…
…The relationship with the family office often is more personalthan with other investors and, in many cases, members of the family become mentors and advisers for the entrepreneur…
The challenge is making contact with the family office . There is no easily available list of family offices that invest in entrepre-neurial ventures. Most introductions are made through personal connections and introductions.1
We’ll only correct the author on that last point, as we offer the industry-leading Family Office Database pre-cisely to help entrepreneurs, advisors, and other family offices connect with each other using a global database (www.FamilyOffices.com/Family-Office-Database). But her article is a great insight into how families may differ from other financing sources and why entrepreneurs would do well to get to consider the family office community.
1. Hadary, Sharon. “Here’s One Financing Source Entrepreneurs Too Often Overlook.” Wall Street Journal. January 25, 2016. http://blogs.wsj.com/experts/2016/01/25/heres-one-financing-source-entrepre-neurs-too-often-overlook/
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GRAHAM HOLDINGS: A PUBLICLY-TRADED FAMILY OFFICE?
We read with interest an interview withTimothy J. O’Shaughnessy, the new CEO
at Graham Holdings, which recently sold the Washington Post for $250 million and continues to operate several businesses.
Graham Holdings was formed by the Graham family and today has investments and operating businesses in media, Kaplan University, health-care, and manufacturing.
The interview digs into how Mr. O’Shaughnessy plans to operate such a conglomerate and how the company differs from other publicly-traded companies:
Graham Holdings’ market cap is $2.5 billion. It resem-bles a family office more than it does a conglomerate.
“Calling it a conglomerate would be an overstatement at this point in time,” O’Shaughnessy said (italics mine).
Like Buffett, he wants to keep investment as simple as possible and stay within his sphere of knowledge. If O’Shaughnessy doesn’t understand it, he doesn’t want to own it.
“I don’t know the first thing about evaluating new biotech technologies,” he said. “That’s just not going to be some-thing that we’ll do.” 1
In many ways, the company seems like a fam-ily-business empire that is for all intents and purposes a family office. However, the compa-ny is listed on the New York Stock Exchange (GHC) and thus is beholden not only to the family
1. Heath, Thomas. “All in the family: Graham Holdings’ new CEO has tough act(s) to follow.” The Washington Post. January24, 2016. https://www.washingtonpost.com/business/economy/all-in-the-family-graham-holdings-new-ceo-has-tough-acts-to-follow/2016/01/22/9e7c4284-bfc2-11e5-9443-7074c3645405_story.html
but also to outside shareholders of the holding company itself. Mr. O’Shaughnessy highlighted the contribution from the family, whose name the company represents:
“The [Graham] family as a collective group is the single largest shareholder of the company. When somebody is invested in that way, it’s not crazy to think that (a) they really, really don’t want to screw it up and (b) they’re probably going to row a little harder because they have that added dimension.”
We’re highlighting Graham Holdings because it is an interesting example of the intersection between private holdings, public equities, and family busi-ness.
New CEO Tim O’Shaughnessy, son-in-law to current chairman of the board Donald E. Gra-ham, will have to navigate the different pressures and expectations as he manages the billion dollar conglomerate.
For those families around the world with holding company structures, majority interests in public companies, or similar situations, this case could prove instructive.