Looking Beyond Venture Capital, the Resurgence of Family Office Investors

Unleashing the power and legacy of family offices for start-up ventures.

by Gary J. Schefsky, January 22, 2019. (c) All Rights Reserved.

Family offices are increasingly playing a unique and vital role in startup investing. They don’t take the place of venture capital, but in early rounds, family offices may lead or supplement venture investment. And, they are more willing to place capital in emerging sectors that are complementary to their background, legacy, and vision than many venture funds. They are worthy of consideration!

Source: ? New Luna Ventures, 2019

Family Offices are created by ultra, high-net-worth families who hire professional investment staff to manage and preserve their wealth. These investment officers deploy capital across multiple asset types: public securities, bonds, real estate, and in alternative assets like start-up ventures. In some cases, actual family members are still involved in helping to determine strategy and may run the family foundation.

The next generation of ultra-high net worth wealth creators and family leaders have a strong altruistic streak and appetite for impact-oriented ventures. They’re not simply interested in impact investing to feel good about themselves; rather they’re looking for sustainable, long-term returns while doing good for community, environment, and society. For example, sectors such as food 2.0, ag tech, and renewables are high on their target list.

Start-ups should welcome family offices, an often untapped investment source. Family offices add-value through their brand recognition, industry connections, network, and background. They prefer to deeply understand the founding team and learn more about the company before investing, something investors in venture funds are unable to attain. This discovery process offers valuable insights to both parties, whether they invest or not.

Family offices favor direct investments vs. venture capital funds. The reasons are lower fees and the ability to meet their preferences for hands-on evaluation and support; however, accessing investments opportunities in start-ups becomes difficult because most founders only know the venture capital ecosystem.

New Luna meets both the goals of family office investors and the needs of startups seeking capital. We bridge the gap between founders and family office investors. This is all the more true when it comes to start-ups in new emerging sectors. Since we syndicate on a per deal basis, as compared to the blind pool of a venture fund, it allows stakeholders to kick the tires and to directly get to know this new breed of entrepreneur.

More importantly, New Luna fulfills critical due diligence discipline through our twenty-five years of experience with start-ups and deep domain expertise. Most family office managers lack this bandwidth as related to alternative assets. Our structure is also favorable since we do not charge management fees - our upside is tied to the success of each of our portfolio companies.

Our thesis is that there is a new type of entrepreneur, those that lead with their values and are building sustainable products and technology. We believe these ventures have better opportunities for upside and are a perfect fit for family office investors from whom we syndicate investments. We manage each syndicate placement as a single asset entity.

The resurgence and new generation shift within family offices do not take the place of venture capital investing, but are a complementary source of capital for startups in emerging sectors. Unleashing the family office as an investor resource is a powerful opportunity for any entrepreneur.

Gary Schefsky’s career is deeply rooted in entrepreneurship and support of renewable and sustainable ventures. Gary established New Luna Ventures to make private equity, impact investments and share his business acumen, creativity, and financial skills. Immersed in San Francisco’s millennial start-up culture, Gary effectively bridges the gap between startup founders and well-established funders.