Family Office Growth News — September 2024 Edition

Welcome back to the September 2024 edition of Family Office Growth News! We bid farewell to summer, and we are back to business. This month we're bringing you:

• An exclusive interview with Rob May : A preeminent thought leader and serial entrepreneur, Rob is a force in the world of AI and startups. Learn how Family Offices can leverage AI’s transformative potential and Rob’s strategic investment advice.
• Monthly Pulse: This month’s pulse covers highlights from the RBC and Campden Wealth 2024 North American Family Office Report; and my latest article on Entrepreneur Media .
• Upcoming Events for October 2024: Don’t miss Ronald Diamond 's keynote at THE REAL Mental Health Summit (October 17-18) and my Family Office List MasterClass (October 24), hosted by Danielle Patterson .

Now, let’s dive into our exclusive interview with Rob May, where he shares valuable advice on AI and investment strategies for Family Offices.

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Rob May on Navigating the AI Landscape in Venture Capital

As AI continues to transform industries, Rob May , Co-Founder of Half Court Ventures and a seasoned AI investor, offers guidance on how Family Offices can navigate and capitalize on this landscape. With a deep technical background and experience investing in over 100 startups, Rob discusses his journey, investment strategies, the importance of data network effects, and key insights for Family Offices aiming to invest wisely in AI-driven ventures.

Early Inspirations and the Leap into Entrepreneurship

Rob May’s fascination with startups ignited during the late 1990s, driven by the dot-com boom. While pursuing a dual degree in electrical engineering and an MBA at the University of Kentucky, he was immersed in an environment buzzing with entrepreneurial energy.

"Even my professors were saying things like, ‘In two years, you’ll never shop at a brick-and-mortar store again.’ It was crazy stuff, but it got me hooked on entrepreneurship.”

Despite starting his career at a large corporation, Rob’s entrepreneurial spirit was undiminished. When the 2008 financial crisis hit and the startup he was working for collapsed, it became the catalyst for his first venture.

"A friend was concerned about losing his online photos if Yahoo messed up Flickr. That sparked the idea for a backup solution for online data, which became Backupify."

The company initially targeted consumers but pivoted to a B2B model upon realizing businesses were their primary customers. Riding the wave of Google Apps adoption, Backupify became a leader in backup and disaster recovery solutions, eventually selling for nine figures.

The Technical Edge in AI Investment

Rob’s deep technical background has been instrumental in his approach to both entrepreneurship and investment. With expertise in electrical engineering and computer chip design, he has a nuanced understanding of AI’s potential and challenges.

“I became interested in AI back in 1999 during my MBA,” he explains. “AI was a cross-disciplinary field, and that intrigued me. My engineering background allows me to grasp the complexities of AI hardware innovations that are critical for informed investment decisions.”

He emphasizes that AI workloads are straining traditional CPUs and GPUs, leading to a surge in new computer architectures.

“Understanding these developments is crucial. For example, we’ve invested in companies like Lemurian Labs, betting on a fragmented AI hardware ecosystem where a universal compiler becomes invaluable.”

Identifying Long-Term Success in Startups

At Half Court Ventures , Rob employs a top-down, thesis-driven approach to investing, focusing on predefined investment themes rather than opportunistic deal flow.

“We look for companies that align with our investment theses... One crucial factor is whether a company can leverage data network effects, which are rare but incredibly valuable.”

He warns against investing in pure application software companies due to AI’s impact on software development costs.

“The cost of writing software is decreasing significantly because of AI. This will change companies’ build-versus-buy decisions and intensify competition. We avoid pure application software companies for this reason.”

The Power of Data Network Effects

Data network effects occur when the combination of multiple datasets creates exponential value, exceeding the sum of their parts. Rob cites FeedbackNow as a prime example.

“FeedbackNow integrates data from feedback buttons, people counters, and even flight data to provide predictive analytics,” he says. “Each layer of data enhances the others, creating a scenario where one plus one equals three.”

In practical terms, through FeedbackNow, airports and hospitals can optimize operations like cleaning schedules and staffing by predicting needs rather than reacting to issues.

“In hospitals, they’ve saved significant nurse labor hours by using predictive models,” Rob notes. “When it’s that valuable, adoption skyrockets.”

Automation and Human Labor: A Balanced Future

When discussing the impact of AI on the workforce over the next decade, Rob remains cautiously optimistic.

“I’m not overly concerned about humans becoming irrelevant in the near term — probably not for at least the next 10-15 years,” he states. “AI tends to elevate lower-performing individuals to average levels rather than replacing top performers.”

He believes that as automation takes over routine tasks, human roles will shift toward areas requiring strategy, judgment, and planning.

“It’s essential for people in all roles to learn how to use these AI tools effectively,” Rob advises. “Skills that machines can’t replicate easily will become more valuable.”

Guidance for Family Offices Investing in AI

For Family Offices eager to invest in AI, Rob offers strategic advice.

“Ensure your AI investment managers truly understand how AI transforms business models. If they’re just adding AI to traditional vertical SaaS without deeper insight, that’s a red flag.”

He suggests adopting a portfolio approach due to the rapid advancements and potential disruptions in AI technology.

“Be cautious with valuations, especially in hot markets,” he warns. “A company might be growing fast but could become obsolete if new technology emerges. It’s important to be valuation-sensitive and invest accordingly.”

Building and Leading the AI Innovators Community

Rob is not just an investor but also a community builder. He founded the AI Innovators community and hosts AI-focused podcasts.

“It’s fascinating to see who’s hot and who’s not over the years, both companies and individuals,” he says. “We focus on what’s next, highlighting people working on novel ideas that haven’t yet hit the mainstream.”

He finds immense satisfaction in fostering a space where technical experts can share groundbreaking ideas. “I enjoy hanging out with super geeky, technical people,” Rob admits. “They’re often the ones pushing the boundaries of what’s possible.”

Mentoring the Next Generation of Entrepreneurs

Having mentored several individuals who have gone on to become CEOs, Rob understands the importance of guidance and the role of chance in success.

“I’m proud that many who worked for me are now CEOs, some leading companies more successful than anything I’ve built,” he reflects. “I try to provide frameworks and ways of thinking about things, emphasizing that there’s a lot of randomness in life.”

He likens the entrepreneurial journey to playing poker: “Sometimes you get a bad beat, but that doesn’t mean you stop playing,” he explains. “Embracing randomness and learning to navigate it is key.”

Final Thoughts

Rob May’s journey from an electrical engineering student to a venture capitalist in the AI space offers valuable insights into the evolving landscape of technology and investment. His approach underscores the importance of technical understanding, strategic thinking, and adaptability.

“I believe in being early and experimenting… You have to embrace randomness, use it to your advantage, and always be learning. That’s how you navigate the AI landscape successfully.”

Connect with Rob May

We thank Rob May for his time and for sharing his expertise and perspective on the future of AI and venture capital. For more insights from Rob May, you can follow him on LinkedIn or visit the following:

• Half Court Ventures: Visit halfcourt.vc to learn about their investment strategies, theses, and portfolio companies.
• Investing in AI Newsletter: Subscribe at investinginai.substack.com for Rob’s in-depth analyses and contrarian views on AI investing.

Looking to elevate your startup? Arondight Advisors is your gateway to the Family Office & UHNWI community. Connect with us today.

Monthly Pulse — September 2024

This month’s pulse brings a focus on critical insights, including a regional report by RBC and Campden Wealth that examines key trends shaping Family Offices across North America. We also share a practical guide for entrepreneurs on engaging with Family Offices, published last month on Entrepreneur.com.

I. RBC and Campden's 2024 North American Family Office Report

Published on September 24, The 2024 North American Family Office Report by RBC and Campden offers a detailed look into trends and strategies shaping the operations and investments of Family Offices across the region.

Based on a survey of 183 North American Family Offices managing an average of $1 billion in AUM, the report provides valuable insights into the priorities of these organizations.

Here are our top picks from this report that you should keep on your radar:

1. Positive ROI in 2024: According to the report, 44% of Family Offices expect returns exceeding 10% for 2024, driven by strong market performances in the first half of the year (S&P 500 up 15%, Nasdaq up 20%).
2. Strategic Shift Toward Private Credit: Family Offices are increasingly turning to private credit, with 39% planning to raise their allocation to this asset class. This reflects a preference for more stable, income-generating assets amid lower liquidity in venture capital.
3. Long-Term Bets on AI and Defense Industries: AI is seen as the top long-term investment theme by 61% of Family Offices, followed by defense industries at 37%. This reflects a strategic shift towards sectors with high-growth potential due to technological advancements and geopolitical changes.
4. Challenges in U.S. Commercial Real Estate: U.S. commercial real estate is facing difficulties, especially in the office sector, with oversupply and rising interest rates. Nevertheless, 77% of Family Offices still have exposure to residential real estate, where demand is more stable.
5. Inflation and Fed Easing as Top Concerns: Inflation is cited as a top concern by 66% of Family Offices, with delays in Federal Reserve easing posing significant risks. As a result, Family Offices are cautious about their investment strategies, often turning to income-generating assets such as private credit and real estate to mitigate these risks.

For a closer look at these trends and more in-depth analysis, access the full report below.

?? Download the full report here.

II. Why Entrepreneurs Should Care About Family Offices?

In my latest article for Entrepreneur Media , I explain why Family Offices should be on every entrepreneur’s radar.

• Patient capital: Family Offices offer long-term investments, allowing businesses to grow without the pressure of quick exits.
• Strategic partnerships: They provide not just funding, but access to valuable networks and operational expertise.
• Sustainability focus: Increasing attention on impact investing aligns with mission-driven entrepreneurs.
• Building trust: Relationships with Family Offices are based on alignment with values and long-term goals.

?? Read the full piece here

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Upcoming Events for October 2024

We're looking forward to attending the following upcoming events in the month ahead.

Ron Diamond Opening Keynote at THE REAL Mental Health Summit

Ronald Diamond , Founder & Chairman of Diamond Wealth , will be delivering the opening keynote at THE REAL Mental Health Summit on October 17-18, 2024, at Deutsche Bank HQ in NYC.

The summit, founded and organized by Shawn Lesser , bridges finance and mental health, focusing on driving global capital into innovative mental and behavioral health solutions. Ron will address the hidden mental health crisis in workplaces and how financial leaders can play a crucial role in addressing these challenges.

?? Register here

Family Office List MasterClass: How to Connect and Collaborate with Family Offices

Join me on October 24, 2024, at 1 PM ET for a Family Office List MasterClass hosted by Danielle Patterson , CEO of Family Office List .

Learn practical strategies for founders, fund managers, and investors to build authentic relationships with Family Offices, focusing on their priorities like wealth preservation, impact investing, and long-term capital strategies.

Key takeaways:

• Understand Family Office priorities.
• Learn practical steps for approaching and engaging Family Offices.
• Build and maintain long-term, meaningful relationships.
• Explore key sectors and trends driving Family Office investments today.
• Gain strategies to differentiate yourself and attract Family Office interest.

You’ll learn how to effectively approach Family Offices, maintain meaningful relationships, and stay ahead of key investment trends.

?? Register here

?? Don't miss out on next month's pulse! Subscribe now.

Wrap up

Thank you for joining us in the September 2024 edition of Family Office Growth News.

We encourage you to share your thoughts and feedback – whether through a comment below or a direct message to Ryan Austin.

Stay tuned for more updates and insights into the Family Office and UHNW sectors. Be sure to subscribe to receive our future issues straight to your inbox. ??

Best regards,

Ryan Austin

Founder, Arondight Advisors

Email: [email protected]

Disclaimer: This publication is created and distributed by Arondight Advisors and may not be construed as investment advice. This newsletter does not provide an analysis of any company’s financial position and is not a solicitation to purchase or sell securities in any company. Arondight Advisors is an investment research and marketing firm, and not a registered broker dealer.