Family Office
A family office is a private company that manages the wealth of one wealthy family (single-family) or several (multi-family) — investments, tax, estate planning, often philanthropy — with no outside investors and no fund life. In fintech it is a direct investor in rounds and secondaries, a limited partner in funds, and sometimes the buyer of a whole company, with patience funds cannot offer.
- Also known as
- Single-family office, Multi-family office, Family investment office
- Used at
- venture rounds from seed to late stage (often as followers, increasingly as leads), secondary purchases of employee and early-investor shares, co-investments alongside funds, and control acquisitions of businesses the family understands
- Binding
- the same documents as any investor; a family office's decision process is its own — a chief investment officer and an investment committee at the large ones, the principal at the small
- Typical scale
- a single-family office manages from $100m to tens of billions; there are several thousand worldwide, concentrated in the US, Switzerland, the UK, Singapore and the Gulf; direct investing has grown as families have tired of fund fees
- Typical difference from a fund
- no fixed fund life, so no forced exit; no carried interest, so less pressure for a 3× in five years; less process, so faster decisions and sometimes worse ones
- Parties
- the family and its principals, the office's professionals, the funds it invests in, and the founders and sponsors who want its capital
How a family office works in practice
A founder who sold a payments company for €400m sets up an office: a chief investment officer, an analyst, a lawyer and an accountant, managing €300m after tax. It allocates across public markets, funds (as a limited partner in three venture funds and two buy-out funds) and direct investments — the founder knows payments, so the office backs fintech founders directly, €1–5m at a time, from seed to Series B, and buys secondary shares in the companies it likes when employees want liquidity. It has no fund to return and no LPs to report to; it can hold a position for fifteen years or sell it next week.
For a fintech founder a family office is money with a particular shape. It can move fast — a principal who likes the deal can commit in a week. It can be patient — no fund life forces a sale. It brings, in the best cases, an operator's knowledge and network. It also brings its own idiosyncrasies: a decision that depends on one person's mood, an investment committee that meets when the family is in town, information rights the family expects but the next lead will not accept, and sometimes a family that wants to be more involved than a founder wants.
In M&A the family office is a buyer worth knowing: for a business the family understands, it pays for a decade of ownership rather than a five-year exit, and it does not have to explain a low multiple to anyone.
Example
A payments fintech raising a €15m Series B has a term sheet from a venture fund at €60m pre-money with a 1× preference and a board seat. A family office founded by a former payments executive offers to take €5m of the round on the fund's terms, plus €3m of secondary shares from two early employees at a 25% discount to the round price. The founders accept both: the round closes at €15m with the fund leading, the employees get liquidity without the company issuing more shares, and the family office's principal becomes an adviser who introduces the company to three banks. Four years later, when a strategic buyer offers €280m, the fund wants to sell — its fund life is ending — and the family office offers to buy the fund's stake instead and keep the company private for another five years. The founders choose the sale; the family office makes 4.1× and asks to be in their next company.
Common mistakes
- Founders treating a family office as a fund, and being surprised by a decision that took a day or a year. - Information and consent rights granted to a family that the next institutional lead removes, awkwardly. - Family offices investing directly in a sector they do not know because a fund's fees annoyed them. - No succession at the office, so the founder's death or the family's dispute freezes the portfolio. - Sponsors and founders forgetting that the patience is real: a family office that does not want to sell can hold a company past the point the founders want out.