When Morten Middelfart went searching for seed investors for Social Quant, his Twitter analytics company in Tampa, Fla., his banker suggested pitching Atlantic Merchant Capital Advisors, a local family office. One informal meeting with the private investment firm, which manages the wealth of individuals and their families, was all it took to land Middelfart’s venture a high-figure investment early this year, along with ongoing advice, customer introductions and part-time office space.
Such experiences are rare, but they do happen, and more family wealth-management groups are betting on private equity deals. There are some drawbacks: Family offices can take longer to seal the deal than traditional angels and VCs, and they generally have a lower tolerance for startup failures, warns David McCombie III, CEO of McCombie Group, a Miami-based private investment firm that has invested about $10 million in half a dozen startups in the past three years. But, he adds, many enjoy advising and supporting founders beyond simply writing a check. Plus, they have buckets of cash.
So how do you go about finding a family investment office to back your business? Not all family offices are so named, making them tough to pinpoint via web or LinkedIn search. Some don’t even have a website. To broaden your search, McCombie recommends creating a wish list of wealthy people you’d love as backers and using LinkedIn to identify mutual contacts to introduce you.
Networking offline is equally important. “Get out into the community first. Get to know everybody,” says Mike Kawula, who joined Social Quant as CEO in April. He credits that tactic with securing Social Quant’s funding. It’s best to let the investment community know who you are and what your company does before you go actively trolling for funding.
Once you’ve got some leads on family offices, call to ask whether they invest in early-stage companies, what startups their current portfolio includes and what industries interest them. “The reality is, if you had a list of 100 family offices and personal contacts at each of them, only five or so would be legitimately interested in directly investing,” McCombie says.
Diego Villarreal, who raised $60,000 in seed capital from a family office for his nightlife app Banter, warns that chasing after cold leads is a waste of time. “People say fundraising is a full-time job. But if you only go for the hot leads that might actually convert into investments, it’s not,” he says.
Cut to the chase by emailing an abbreviated version of your pitch deck to hot leads. It should be designed to grab their attention. “Three to four slides is plenty,” says Jeremy Office, principal of Maclendon Wealth Management, a multifamily wealth-management practice in Delray Beach, Fla., that caters to entrepreneurs. “The idea is to avoid overwhelming them and instead intrigue them enough so they want a follow-up meeting.”
If you get the meeting, let investors know you’re attracted to their experience or interest in your industry, McCombie advises. “Emphasize that you’re not just looking at them as another rich person, but you came to them specifically because you think they can add some value.”
In other words, show respect for the fact that these families constantly get tapped for capital, and they’ll be more likely to welcome you into theirs.