- Family offices risk losing out on deal flow to brand-name PE and VC firms because of their low visibility, lack of brand awareness, and resistance to giving visibility to their ethical credentials
- ‘Business track record’ (35.4%) and ‘ethical credentials’ (25.1%) were the two most important determining factors for a company or co-investor when considering whether to work with one investor over another
- But many fiercely private family offices have traditionally pursued an approach of staying firmly under the radar, saying very little about their track record and shying away from articulating their mission and values, leaving them victim to losing out on deals
- Other key drivers for stakeholders when considering whether to work with an investor were the visibility of the investor itself, its perceived alignment with the company, and access to resources
Family offices risk being seen as ‘second-rate’ investors when compared with the bigger brand-name Private Equity (PE) and Venture Capital (VC) firms by not taking more steps to selectively increase their visibility, better communicate their business track-record, and showcase their ethical credentials, finds new research from Transmission Private.
A new survey of 2,000 stakeholders reveals for the first time that ‘business track record’ and ‘ethical credentials’ were the two most important determining factors for a company or co-investor when considering whether to work with one investor over another. These two factors were deemed to be more important than access to capital, enthusiasm for the business, industry contacts, expertise and knowledge, speed of decision-making, and other considerations.
And yet, many fiercely private family offices have traditionally pursued an approach of staying firmly under the radar, saying very little about their track record and shying away from articulating their mission and values, driven by concerns about their privacy. This research demonstrates for the first time that this approach leaves them victim to losing out on access to the most competitive deals.
More than a quarter (25.1%) of respondents said that showcasing a track record of ‘strong ethics’ was an important factor when considering whether to work with a private investor. Having a visible ‘business track record’ (35.4%) was the only factor to beat ethical credentials.
For respondents aged between 18 and 24, strong ethics (32%) outranked even business track record (29%) as the most important factor when considering an investor. This suggests family offices who want to access the technology VC market – which is dominated by companies with younger founding teams – will need to do even more to communicate their mission, ethics, and purpose.
The results underline the unseen but fierce public relations and brand battle private investment offices have to fight to get access to the best and most competitive deals. It comes at a time when the household name PE and VC firms continue to invest substantially in strategic communications, public relations, and advertising to give themselves a competitive edge.
Outside of ethics and business track record, the results showed that the other key drivers for stakeholders when considering whether to work with a family office were the visibility of the investor itself, its perceived alignment with the company, and its access to resources, including financial capital and industry connections. All these factors underline, in different ways, the importance of a family office's communications strategy, positioning, and reputation in securing attractive deal flow.
Jordan Greenaway, Managing Director of Transmission Private, said: “There is a fierce battle underway between families offices and other investors, including the big PE and VC firms, for access to the best deals.
“Family offices and private investors need to work extremely hard to put themselves at the front of this long queue. This research shows for the first time that putting in place a proper strategy to communicate their ethics, mission, and values is one of the first steps that need to be taken.
“We know this is uncomfortable for many private investors and family offices, who instinctively prefer to firmly stay below the radar. But these investors risk losing out to more visible investors with a clear communications strategy.
“The truth is that family offices are falling further and further behind, and increasingly chasing the scraps of other better known PE and VC firms.
“Building a strong reputation through articulating a family office's track record, profiling its team members, demonstrating how it is aligned with partners, and showcasing ethics will put ‘clear blue water’ between an investment office and its competitors.”
Luke Thompson, Head of Client Services at Transmission Private, said: “Communicating effectively and building a strong reputation for a family office gives it a clear competitive edge, and will reward it with better financial outcomes.
“There is sometimes a misconception that ethics and values are new-age puffery whose importance in financial decision-making is overstated. This is false. A family office's commitment to ethical conduct and economic impact gives it a clear market edge in accessing deals.
“A family office should put to paper their distinct investment and moral outlook, and find wording to express this in a clear way. Once this has been put to paper, the family office needs to find the means to communicate this publicly.
“This must be balanced against the privacy concerns of the family office, of course, but there is a sliding scale of visibility that investors should seek to move along: creating printed collateral, such as an offline brochure; launching a website, and securing selected coverage.”
Transmission Private is the leading global strategic communications adviser to successful individuals, families, and their companies. The poll was conducted by OnePoll, which is a member of ESOMAR and employs members of the MRS.