Venture Capital Fund Vs Family Office – What’s Best For Tech Investment? Guy Avshalom writes for Wealth Briefing
Guy Avshalom examines the pros and cons of using venture capital or family office structures to handle technology investments.
Family offices get involved in venture capital – which appears a natural fit given that FOs are famous exemplars of “patient capital.” And some family offices can be offshoots of VC firms themselves or engage in so much venture capital activity that they compete with standalone VC firms. This can raise questions about whether family offices compete with VC firms to some extent, or are a complement to them.
A venture capital fund and a family office are evaluating early-stage tech businesses. Which organisation is likely to achieve a better return on its investment? It is worth looking at the origin and structural differences between a VC and a family office to form an opinion about this question.
Family offices originated to provide 360 support to high net worth families/individuals managing their assets. The “family office” was traditionally established to consolidate functions such as legal, accountancy, inheritance tax and succession planning, pension and life assurance planning, private philanthropy and assets management under one roof. Beyond a certain level of assets this consolidation of services dedicated exclusively to one or few families makes commercial sense. It helps to mitigate potential conflicts of interest that may arise when engaging third parties to provide banking services. The family office in its basic form manages the owners’ wealth and allocates the assets accordingly. Its primary aim is to manage and preserve the founders’ capital.
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DATE 07/01/2022
