Family office investment

A family office manages the wealth of one wealthy family, or of several, and some invest directly in private companies by buying shares. The money is the family’s own, so a family office can hold for longer than a fund with a fixed life and agree terms deal by deal, but each office sets its own rules.

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What a family office is

A single-family office is a private company set up to manage one family’s wealth: its investments, property, tax and, in some cases, the family’s own businesses. A multi-family office does the same for several families. Some are run by a handful of people. Others employ an investment team that looks at private companies directly.

Family offices put money into private companies in two ways. They invest through venture and private equity funds, as limited partners, and some also invest directly, buying shares in a company the way an angel or a fund would. Direct investment is the part that matters to a company raising money.

Each family office sets its own investment policy, decided by the family or its advisers, and that policy can change when the family’s priorities change. A family office is a private business with no duty to publish what it invests in.

Single-family offices manage one family’s wealth
Multi-family offices serve several families
Some invest directly in private companies
Each sets its own investment policy

How family offices invest in companies

A family office investing directly may take a minority stake in an early or growth round, invest alongside a venture fund that leads the round, or buy a majority of an established business. The money belongs to the family, so the office answers to the family and has no outside investors waiting on a fixed timetable. That allows a longer holding period, and some family offices hold companies with no sale in mind.

The family’s own history shapes what it backs. A family that built its money in property, food or engineering may want to invest in those sectors, where it can judge the business and open doors. Another may look for businesses that fit the family’s values, or that are based in the region the family comes from.

Tax relief works differently from an angel round. SEIS and EIS income tax relief is for individuals, so a family office investing through a company does not get it. Family members investing in their own names can claim it if they meet the investor conditions. Ask how the family plans to hold the shares before you build the round around SEIS or EIS.

Family office and venture fund compared

	Family office	Venture fund
Whose money	The family’s own	Outside investors’ money, managed by the fund
Time horizon	Set by the family, with no fixed end date	A fixed fund life written into the partnership agreement
Who decides	The family, or its investment team and advisers	The fund’s investment committee
Terms	Agreed deal by deal, on ordinary or preference shares	Preference shares with a standard set of investor rights
Money for later rounds	Depends on the family’s appetite and other commitments	Limited by the fund’s size and remaining life
Involvement	Anything from hands-off to a board seat	A board seat or observer seat when it leads a round
SEIS or EIS relief	None for an office investing through a company	Only where the fund is set up as an EIS fund

What a family office looks for

Fit with the family

A sector, region or set of values the family knows and wants to back, or a business connected to its own interests.

A business that lasts

A company that can grow for many years, with cash generation or a clear route to it, and a return for the family over that period.

People it trusts

Founders and managers the family is comfortable working with over a long period, who report openly when things go wrong.

Terms, board seats and due diligence

The documents are the same as in any equity round: a term sheet, a subscription agreement, new articles, a shareholders’ agreement and a disclosure letter. A family office without a standard form may accept the company’s own drafts, or bring a law firm with its own. Read every term as you would a venture fund’s: the valuation, the class of share, any liquidation preference, the consent list and the leaver terms.

A family office taking a sizeable stake may want a board seat or an observer, and a family member may take it. Agree in writing who can sit on the board, whether the right passes to another family member, and what happens to the shares if the office is wound up or the family’s wealth is divided between generations.

Due diligence depends on the office. One with an in-house investment team will run the same financial, legal and commercial checks a venture fund runs. A smaller office may hire an accountant and a law firm to do it. Either way, have the data room ready before the first meeting; getting investor ready lists what goes in it.

Finding family offices

Finding a family office usually means an introduction. They come through the family’s accountants, lawyers, private banks and wealth managers, through other investors the family has backed companies alongside, and through a funding search through Swoop, which includes family offices among its equity investors.

Send a short summary first, and the full deck when the office asks for it. The rules on financial promotion apply here as they do to any investor. A family office may fall within an exemption for high net worth or sophisticated investors, but check with your lawyer which exemption you are relying on before you send an invitation to invest.

A family investor can stay with the business through later decisions: a further round, a sale, a management buyout or handing the company to the next generation. If those questions are close for you personally, selling your business and inheritance tax on a business cover the personal side.

Questions people ask

What does a family office invest in?

Whatever the family’s investment policy allows. Alongside listed shares, bonds and property, some family offices invest in private companies, either through venture and private equity funds or directly by buying shares. Direct investments can be minority stakes in early or growth rounds, co-investments alongside a fund, or majority stakes in established businesses. The family’s own sector experience shapes which companies it backs.

How is a family office different from a business angel?

An angel is one person investing their own money, usually in early rounds, and deciding alone. A family office invests a family’s wealth through an organisation, which may have an investment team, outside advisers and a committee. It can invest larger sums and at later stages, and it invests through a company, so it cannot claim SEIS or EIS relief on what it puts in.

Do family offices take majority stakes?

Some do. A family office can buy a majority of an established business and hold it for the long term, which can suit an owner who wants to sell to a buyer with no plan to sell the company on. Others take only minority stakes in growing companies. Ask early which kind of investment the office makes, and how long it expects to hold.

Can a family office investment qualify for EIS?

The company can still qualify, but EIS and SEIS income tax relief is given only to individuals. A family office investing through a company gets no relief. Family members who invest in their own names can claim it, provided they meet the investor conditions, including the rule that an investor with their associates must not hold more than 30% of the company.

How do I approach a family office?

Through an introduction where you can: the family’s accountant, lawyer, private bank or wealth manager, another company the family has backed, or a funding search through Swoop. Send a short summary of the business, the amount you are raising and what it pays for, and hold the full deck until the office asks for it. Check with your lawyer before sending any invitation to invest.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

All business funding

Family office investment

What a family office is

How family offices invest in companies

Family office and venture fund compared

What a family office looks for

Fit with the family

A business that lasts

People it trusts

Terms, board seats and due diligence

Finding family offices

Questions people ask

Equity investment

Growth capital

Venture capital

Angel investment

Equity investment

Family office investment

What a family office is

How family offices invest in companies

Family office and venture fund compared

What a family office looks for

Fit with the family

A business that lasts

People it trusts

Terms, board seats and due diligence

Finding family offices

Questions people ask

Equity investment

Growth capital

Venture capital

Angel investment

Equity investment

Start a funding search

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