How Different Family Offices Invest And What They Expect From Founders

Researching how family offices invest and what they expect from founders should be one of your top priorities when fundraising. Family offices are a valuable source of capital for promising startups, and several such organizations support viable concepts. Innovation and impact-driven are some of them.

Institutional data suggests that single-family offices and multi-family offices in the US family office ecosystem directly control an asset pool floating between $4T and $5T. This massive concentration of private wealth is expected to surge heavily over the next decade.

Experts estimate an impending $124T generational wealth transfer in the United States. This is the capital pool you’re targeting. But before drafting a compelling pitch deck, understand that not all family offices invest in the same way. Nor do they process applications like other investors.

Founders typically approach them just as they would a conventional venture capital (VC) firm. What they don’t realize is that the family office investment thesis is entirely distinct from VCs and private equity (PE) funds. Further, they have entirely different lenses for evaluating opportunities.

You should also know how to differentiate between the various types of family offices. For instance, a founder presenting a conservative cash-flow business to a next-generation family office seeking disruptive innovation will likely fail.

Understanding what family offices expect from founders is often more important than understanding how much capital they have. Here’s what you need to know about how different family offices invest.

Relationship-Driven Family Offices

These family offices are essentially trust-first investors who rely on networks to source investment opportunities. These opportunities often arrive through channels, such as attorneys. family networks, wealth advisors. existing portfolio companies, and investment clubs.

Other family offices may also provide warm introductions to repeat founders who have successfully built companies. Or to founders with a disruptive startup idea that could deliver substantial returns. Certain offices may also co-invest with other offices to support startups they trust.

Keep in mind that relationship-driven family offices rely more on founders’ credibility and track records than on spreadsheets. They often prefer investing in people they know or in founders that trusted intermediaries have referred to them. Relationships and trust are crucial for finalizing deals.

Investment committees base their decisions on reputation, referrals, and relationships with aspiring founders. They also look for the expertise to navigate economic cycles, market uncertainties, and the hurdles of building a startup.

Family offices invest in founders they are confident can take the startup to the finish line—through a merger or acquisition. Or, going public with an Initial Public Offering (IPO).

What Should Be Your Strategy?

If you intend to target a relationship-driven family office, start by formulating a strategy to build relationships and expand your social media presence. Identify respected mutual contacts who can influence decision-making. Connect with them and request an intro to the family office principals.

You’ll also focus on building reputation and social proof on social media channels like LinkedIn, X, Behance, Dribbble, or GitHub. A robust media presence on platforms specific to the industry within which you operate can help create a favorable impression.

Next, reach out to them and maintain regular communication, even if you’re not ready to raise capital. You’ll talk about the concepts you’re developing and the progress the startup is making. Don’t just treat the relationship as transactional with the intent to secure capital. Instead, work on building trust.

A cold outreach is unlikely to work—you need warm intros to be taken seriously.

Next-Generation Family Offices

When exploring how different family offices invest, take the time to analyze their internal hierarchies. Many family offices encourage members of the younger generation to actively participate in capital allocation and investment. It’s how they train the NextGen to take over asset management later.

Next-generation family offices thus have an investment thesis centering on emerging trends. These members are more willing to challenge traditional investment approaches. They seek transformative opportunities rather than incremental gains, focusing heavily on future trends and tech-driven shifts.

If you work in deep tech, fintech, digital health, space technology, climate technology, and artificial intelligence, your chances of securing capital are higher. You’ll connect with younger members who are willing to take calculated risks when conviction is high.

These investors are looking for massive market opportunities and startups capable of generating venture-scale returns.

What Should Be Your Strategy?

As with any other investor, building relationships through introductions and referrals is a great way to get your foot in the door. Once you connect with them, you’ll underscore the larger vision rather than just the current metrics. Present compelling market timing arguments and how the future will evolve.

Show why your company could become a market leader in its sector. Better yet, demonstrate how you can create an entirely new category. Take the case study of Yoav Regev, a founder who was recently interviewed on the Dealmakers Podcast.

Yoav and his cofounders were convinced that data and security would be crucial in the modern world. This was way before AI became mainstream. When they approached investors, they were told, “This isn’t even a real category.”

However, they persevered and eventually raised over $100M for the company. The takeaway? If you strongly believe in your vision, don’t hesitate to see it through. But when working with investors, you’ll present incremental development milestones that can lead up to the disruptive outcome.

Connect with Next-Gen members at networking events, conferences, and investor-founder meet-ups. Always be ready with an elevator pitch to share with them. You can also build familiarity by following them on social media platforms and other forums.

Strategic Partner Family Offices

Strategic partners are investors who bring more than just capital to the table. Capital is only a small part of the equation. These entities are more concerned about the strategic value they’ll contribute. This is why they often look for opportunities connected to industries where the family built its wealth.

For instance, if the family sources its wealth from a multinational pharmaceutical corporation, the office will invest in new medicines. Startups developing new treatment protocols or drugs are likely to attract capital as well as assistance with expertise and equipment.

In addition, the family office will target startups and founders who can benefit from its operational experience and distribution networks. They may also facilitate the building of strategic partnerships to secure talent, inventory, equipment, and more.

Typically, these investors become highly involved after making an investment. Their focus is on strategic alignment and startups that can leverage their knowledge and network. Most importantly, they support scalable companies in which their contributions can accelerate growth.

What Should Be Your Strategy?

Not only will you target investors operating within your sector, but you’ll also draft the pitch according to how different family offices invest. Your proposal should highlight partnership opportunities beyond capital, underscoring the areas where the office can add value.

Don’t forget to refer to the synergies with existing portfolio companies or businesses. Among the common mistakes founders make is treating them like passive investors and overlooking the strategic benefits they can provide. They fail to demonstrate an understanding of that value and how both parties can benefit.

Keep in mind that storytelling is everything in fundraising. In this regard, for a winning pitch deck to help you here, take a look at the template created by Peter Thiel, Silicon Valley legend (see it here), that I recently covered. Thiel was Facebook’s first angel investor, with a $500K check that grew into more than $1B in cash.

Remember to unlock the pitch deck template that founders worldwide are using to raise millions below.

Active Co-Investor Family Offices

Active co-investor family offices adopt a more hands-on approach, focusing on specific deals. Their investment thesis includes identifying promising founders and startups and backing them. However, they are dynamic participants keenly involved in every aspect of building and scaling the startup.

These investors prefer to dive deep into each opportunity to fully understand it before committing capital. Many act as co-lead investors, conducting thorough due diligence on each startup. They may also co-invest with venture capital firms, private equity funds, angel investors, and other offices.

Do, understand how different family offices invest and how they operate. For instance, strategic partner family offices provide expertise and assistance without being directly involved in day-to-day operations. Not so with active family office investors who believe that visibility improves outcomes.

When evaluating potential opportunities, these family offices focus on high-return startups that can demonstrate validated market demand. They are likely to follow strong professional lead investors who have already vetted the opportunity. Clear governance structures in the startup build conviction.

What Should Be Your Strategy?

Given that active co-investor family offices prefer backing pre-vetted opportunities, your deck should highlight existing investors. As your expert fundraising consultant will advise, you should tailor each pitch to the target investor. Accordingly, list the lead investors who have already invested.

You’ll also showcase the diligence that lead investors have completed and their findings. Don’t forget that traction is a high priority for these investors, whether in terms of market validation or a rapidly growing user base.

Also, don’t forget to include information about internal governance and typical investor reporting practices.

If you intend to approach such family office investors, delay the outreach until you’ve secured a strong lead investor. Further, understand the importance of complete transparency in your dealings with them—particularly when providing sufficient diligence materials.

As with strategic partner family offices, demonstrate that you value the assistance they can provide. Highlighting the areas where you can leverage their involvement clarifies the investment pathways.

At the same time, lay out clear terms and conditions regarding voting rights and board seats. Don’t forget to specify exactly how much of a say board representatives (if any) will have in the startup’s decision-making.

Passive Allocator Family Offices

As the name suggests, passive allocator family offices prefer to maintain low involvement with their portfolio companies. Their focus is only on capital preservation, stability, and the potential returns they can expect from the investment. Risk management often matters more than maximizing returns.

These investors view investments through a portfolio allocation framework. For instance, through venture capital firms, private equity funds, hedge funds, real estate managers, and other proven investment vehicles. They typically approve proposals that other investors have pre-vetted.

Different family offices invest according to their internal hierarchy and thesis. Unlike strategic and hands-on family offices, passive family office investors are unconcerned with operational and governance transparency.

Instead, their decisions center on predictable outcomes, top-talent managing the startup, lower risk exposure, and proven track records.

What Should Be Your Strategy?

Although passive allocator family offices conduct due diligence, they prefer to follow professional investment firms’ lead when selecting portfolios. This is why reaching out to them directly might not result in fundraising success.

A more effective strategy is to build relationships with VC firms, angels, PE funds, and managers they already trust. Here again, referrals and warm intros will work well for securing capital. Your pitch must emphasize risk-mitigation strategies, stability, and the potential for attractive returns.

Don’t forget to underscore complete transparency in your governance and reporting practices. These investors will need assurance that their capital is secure. As with active co-investor family offices, wait until you have reputable investors on your cap table before approaching them.

Track records and proven traction carry high weightage in their vetting processes. Ensure you include a detailed team slide, sales and revenue data, customer acquisition numbers, and market share data.

Regardless of whether you’re approaching family offices or another investors, your success rates are likely to be higher if you have a prior relationship with them. If you’re looking for more information about how to build trust before sending a pitch deck, check out this video I have created.

Understand How Family Offices Invest and Tailor Your Narrative Accordingly

Including family offices in your list of potential investors is a great strategy. However, before you approach them, be aware that the best family office investors are not necessarily those with the most capital. You’ll select the specific offices whose decision-making frameworks align with your company’s.

You’ll do the necessary research to understand how each family office investor selects, evaluates, and finalizes investment opportunities. Gathering the necessary data is the right first step that will help you target the right investors and tailor your messaging.

That’s how you’ll significantly improve fundraising outcomes. The key lesson is simple: before pitching your company, identify what type of family office you’re speaking with. The quality of that alignment often determines whether a conversation turns into a check.

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