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TP Bites: Private Investors & Family Offices – Deal flow

In our latest episode of TP Bites, Jordan Greenaway and Luke Thompson talk about how our new deal flow service is structured to help private investors, family offices, successful individuals and their companies generate high-quality deal flow.

city lit up at night

In our latest episode of TP Bites, Jordan Greenaway and Luke Thompson talk about how our new deal flow service is structured to help private investors, family offices, successful individuals and their companies generate high-quality deal flow.

Transcript

Jordan: So, I’m here joined by Luke, a partner at Transmission Private, to discuss why we’ve just launched a new deal flow service, and specifically in the context of family offices. 

So, let me give you the background to this. We know that over the last 12 months, off the back of the pandemic, there’s been significant appetite amongst family offices to get access to good quality deals. It’s not only that they see the opportunity in the market, it’s that these family offices usually have a reasonable amount of patient capital. So are able to invest on a longer-term basis to turn around challenged companies - more so than other investors. 

And there are many companies up and down the country that are facing difficulty at the moment. Not only retail and hospitality but in allied industries as well. Many of these companies are effectively screaming out for a lifeline. And these type of deals present a financial opportunity to a family office on one side, but also act as a positive chance for the company to continue existing on the other side. 

But many family offices don’t know how to access these deals. They’re relatively unknown, they’re under the radar, they’re very quiet. So we saw the opportunity to launch a product that gave family offices careful, considered visibility amongst that deal flow audience. So that’s the kind of background to it. 

But Luke, I’ll throw to you first, why do you see the need for this product and this service right now in the market?

Deal Flow Competition: Reputation opens doors

Luke: I think it comes down to competition. I think the market is increasingly competitive and I think family offices are looking for that edge. Ultimately, it comes down to reputation, and having a strong, powerful, curated reputation - it gets you a seat around the table, it makes people pick up the phone to you and ultimately opens more doors. 

Family offices are competing against big VC funds, institutional investors. And I think they realise that if they want to get private equity deal flow, if they want opportunities, if they want the phone to keep ringing, then they need a strong powerful reputation to smooth over that process.

Jordan: Completely right, Luke, and it reminds me of some discussions that we’ve had with family offices. They don’t have websites at all, they don’t have any digital footprint. They might not even have an email. They might be running their family office as a wealthy individual of a Gmail or a Hotmail account. And it strikes them as absolutely strange and bizarre that they would need to raise their profile or elevate their reputation. 

Because they have the financial capital, so surely people want it. But good deal flow and lucrative deals are highly competitive. And as you said, you’re not only competing against other family offices, you’re also competing against VC funds and PE firms. And here’s the point that’s really key: these VC funds and these PE firms have been marketing themselves and elevating their own reputation and profile in the right circles for 30 years, 50 years or possibly even a century. 

So where do you think a highly attractive tech startup is going to go for an investment? It’s not going to be to Billy down the street who has a lot of money, but nobody knows and has no credibility! It’s going to be to Index Ventures, who are known for investing in the best tech companies around the world and who probably have a network that can help that company as well. 

So it’s about a family office recognising that they’re after more than my money. Investees are after expertise, background in business, connections, and an appetite and alignment with the type of business that they are. But these businesses can’t see that at the moment because they search your family office or they search you individually and they can find nothing at all.

Digital Profiles: Online visibility enhances credibility

Luke: In many senses, you’re talking about family offices that have existed for years. Usually, in the form of a family exiting, or disposing of a big asset. They then pile all their money into a family office. They stay very below the radar. It’s more about preserving the wealth rather than increasing the wealth. 

And there’s now a new generation of family offices coming onto the scene - smaller family offices as well - that have no visibility at all, and they’re starting from a fresh. They’re saying we’ve got X amount of money in the pot, we don’t really know what to do with it, we don’t really know which industries to go into, and even if we want to go into said industry, no one even knows that we’re we’re in that space. 

We had this with a new client recently. They were a small family office - a family office that had some visibility online, a family office that had been established for well over 10 years - who were looking to invest a significant amount into one particular industry. But of course, no one knew them. We were the only people who knew and they got some great value out of this product. 

We did a bit of strategic PR in their chosen industry and we built their reputation in that particular sector. Ultimately, that helped people to pick up the phone and to look at them as a viable alternative, as a viable investor in that particular business. So that’s where it can add value.

Jordan: And I can imagine a family office listening to this and thinking “Oh yeah, that’s all well and good. But I don’t want any reference to me anywhere” or “I don’t want to be in the newspapers, I don’t want to be in the press, I don’t want to promote myself”. 

But the reason we designed this product was because we’re not like a conventional PR agency, we communications advisors. We understand how you think and the reason we designed this very unique, bespoke product was because we recognise that it’s a very difficult tightrope. On one side, you need some form of selective visibility to generate venture capital deal flow. On the other side, you don’t want this interest from the press or from online to breach your privacy in any way. That’s why we designed this very specific product, to answer those very, very unique needs. 

Let me just take you through how this will work. How, if you’re interested in sitting down with us, what that process would be. I boil it down to six different elements of the process. Number one is, firstly, if we’re going out to the market, if we’re going to selectively and carefully raise visibility of your family office, then we need to know what that family office stands for. We need to know how it’s positioned, we need to know the type of things it’s investing in, we need to know what it wants to achieve, we need to know what that family office is. So that’s the first thing we’ll do, we’ll sit down and get a very clear positioning statement to paper. 

Next is - and this differs from client to client, because not everyone is comfortable with visibility - we’ll sit down and look at what your digital footprint needs to be now. Generally, that starts with giving your family office some type of website presence. And that website is in many ways an articulation of the positioning statement that we’ve just sat down to work through. So now when you’re sitting there searching your family office, or more importantly, when deal flow prospects are, they can find you and they view you as a credible outfit. 

Credibility is important here. Because we know over the last five years, there has been a complete spate of what is effectively ‘fake’ family offices. There is scepticism and doubt about family office investors and having a strong website presence is an important element of generating deal flow management. 

But just before I go on to the next steps of what this product involves, I just wanted Luke to talk to us very briefly about how that website process works with family offices.

Family Office Websites: Evaluating what to put online

Luke: I think it comes down to, right at the very core, what does that family office stand for? Because often those key mission points are usually spoken about around the dinner table, but aren’t necessarily communicated online. 

So what does that family office look for? And then how does that process look like? It’s usually a three to six month process. You sit down with the family to really understand what they want to communicate. Looking at the sitemap and the structure of the website. What pages do we need to include on the website? And we will look at the branding, the visual aspects, and what sort of pictures we want to use. This is even before we put pen to paper. 

What kind of format is that website going look like? Is it going to be heavily focused on the family? Probably not in most circumstances. Is it going to look corporate and city-like? There are various different options and avenues to take as to the visuality of the website and the images. 

Then you look at the type of content that you want to put on the website. Looking at the portfolio of investments - because family offices have usually got a hidden portfolio of investments and of businesses that they work with. 

All in all, you’re looking at the physicality of it, you’re looking at the structure of the website, you’re looking at the content, you design it and then you launch it. So it’s a very considered and defined process. As for people who are worried about their privacy, the beauty of having a website is you can turn it off - you can delete the content if you wanted to.

Jordan: And to get practical as well, just to chime off the back of that. As part of that process, we’ll sit down with a family and develop three, four or five different options. Do you like this visual style? Do you like that visual style? And that’s an important part of the process. 

We don’t just present this as a fait accompli. It is a process where the family gets entirely comfortable with the final result.

Luke: Absolutely. I do think one of the best lens to view this through is to think about the audiences that you are communicating to. I do think a lot of families think “Well, you know, maybe I’m only going to get 50 visitors to the website a month”. But you can guarantee that those 50 visitors are probably highly influential, probably high-profile people who you’re communicating to. 

So think about what that audience wants to hear and read. And if you’re looking for investment in let’s say fashion, then think about what kind of content you want those potential investors to read about you, and work back from that.

ESG & CSR Credentials: Social impact is important for investees

Jordan: To go back now to the product. Generally, the fourth element we provide is ESG consultancy and advice. 

And this was informed by some research we did, I think it was the end of last year, where we polled potential investee companies on what they were looking for from family offices and investors. Number one was the business track record of the investor - and we usually cover that off on the website. There’ll be some type of element on the website that showcases the track record of that family office in backing good deals. 

But number two was mission purpose ESG credentials. And you can’t launch a family office and get the best private equity deal flow without ticking that box. So we’ll sit down with the family, we’ll work out some type of impact base proposition and we’ll communicate that for the family office. It’s very important, and more important than the most family offices would first think. 

Now for the next element. We’ve got the positioning, we’ve got the website, we’ve got the ESG component, and we’ve got a strong digital footprint. And we might have enhanced that digital footprint in other ways. For example, when you search the family office, there might be other profiles around the web to further enhance the credibility of that family office. 

Next, we start to have a discussion about selected coverage. And again, not appropriate for all family offices, but I do think it’s probably more appropriate for more family office than you would first think. If you want to generate venture capital deal flow in a particular sector, industry or geography, if investee companies don’t know that, then they’re going to find it very difficult to pick up the phone to you. So at this stage, we sit down and think, shall we try to find two or three bits of targeted coverage to generate some media interest that leads to deal flow. 

This might be announcing investment targets to the media or it might be around announcing deals that you’ve done or just about to do. And again, this is not about profiling the family office. This is not about inviting lots of national media attention on the family office. It’s about identifying that very selective community of people that we want to reach and devising very safe routes to build visibility amongst that group of people. 

And I know, Luke, you’ve recently done this for a family office. Can you talk us through the practicalities of that process?

Media Coverage: Controlling your narrative in the press

Luke: I‘ll run you through the step by step process. We firstly sit down with the client. We want to understand what kind of sector they’re looking to invest in. We think of a few news lines that potentially are good positive, controlled news stories to go out to the media. Then we mesh it all together. 

We will write the story. We will then locate and target the press that we feel those communities of people will read. In that instance, for that client, it was actually regional business press as they wanted to speak to regional businesses. So we thought that the best avenue to go down was creating and crafting a story that was focussed on the regional business press. 

So from start to finish, we will work out the story, and then work out what kind of media you actually want to pitch it to.

Jordan: Now you’ve got a website online. You’ve got your positioning. You’ve got your press. Some people may have been uncomfortable through that whole process. They may only want to acquire five different businesses in the world - and they’re very, very specific businesses. They might be aluminium manufacturers, for example. But there are other clever ways we can work together to enhance your reputation. 

And this takes us down to the next point, which is physical collateral. An aspect of this new service is not only having a digital presence but having a physical presence too in terms of physical collateral, brochures and documents. That might be, for example, an annual report on the family office or a case study on the family office. This is really interesting and valuable to families. Because we can say “Look, we’ve created this compelling piece of content that we know, if it gets into the right hands, will generate interesting and engaging discussions”. 

Then we’ll get the other half of our team who specialises in stakeholder management and stakeholder mapping to go out and find those 50, 100, 150, 200, maybe 1000 stakeholders who need to have that in their hands. We generate the physical collateral, we identify the people, and then we organise a mail out. There are other ways to build a reputation that are less digitally focussed. 

As for the final aspect of our work - and this has been less of an aspect of the last 12 months because of coronavirus, but it’s starting to come back now - is physical networking and eventing. You can sit down with a family office and say “who are the 50 people who will make a difference to your deal flow management?”. 

It might be a co-investors, it might be other family offices, it might be administrators, it might be structuring experts who can bring deal flow, it might be the entrepreneurs themselves. We can organise a fairly informal under the radar event to carefully and quietly build your profile amongst that group of people. 

Luke, how would an event like that be organised?

Networking & Events: Growing your contact book

Luke: I think it starts from a position of identifying who you want to meet and bring into the same room as you. From there, you work backwards from that. 

It’s important to really understand what type of event that the client wants to hold. You could do anything from a big networking event with 100 people, to something more intimate like a themed event at a private member‘s club. 

So there are many different forms that events can take. But ultimately, they have to be focussed around what type of people that you want to get into the room and then contacting them with a really interesting and engaging event that they’re going to come to. That‘s ultimately what will then open the door to building those relationships with those individuals.

Jordan: Just to add to that, Luke. It’s not a case of sending invitations that say “Come and meet me, I want to invest in companies”. We will devise this event in a really clever way. 

Perhaps we have a guest speaker, maybe the event takes place under the auspices of a charity. But it might not even be obvious that the purpose for the client is to build contacts with interesting, engaging and useful people. 

So when we look back on this discussion that we’ve just had about deal flow, I’d say two things. Firstly, the market is much more competitive than ever before. Which is why we’ve seen the need to launch this deal flow product. 

Secondly, when you look at the various different ribs of this deal flow product that I pulled out: one is we do positioning, two is we do digital footprint and website presence, three is we do ESG consultancy and impact consultancy, four is we do selective coverage and media generation, five is we do physical collateral, and six is we do events. Pulling that all together is the way to generate quality deal flow and enhance your reputation.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.