A Deep Dive: LSN Family Office Investor Mandates

By Lucy Parkinson, Research Manager, LSN

While there are many potential financing options for a fundraising life science executive to consider, few are more intriguing than family offices.  In the hopes of understanding more about how these institutions seek opportunities in the life science sector, I’ve taken a look at the last 30 family office mandates gathered by LSN research team to get some insight into exactly what’s making them tick.

We’ve covered family offices extensively before, but just as a refresher: Family offices fall into two broad categories; single family offices (SFOs) that are responsible for investing the assets of one family (typically with net worth of over $100m), and multi-family offices (MFOs) which provide investment guidance to several families, typically those with significant assets but not enough to justify hiring their own dedicated investment team.

Beyond this initial distinction, family offices can orient themselves in any number of ways, especially when it comes to direct investment in life sciences. This variety is apparent in the range of investment styles and interests represented by the family offices tracked by LSN:  Some notable examples include structured angel vehicles that make dozens of sub-$250,000 placements every year, and families that have created evergreen PE funds which allocate over $50m to each company that they invest in.  This variability makes sense, because every family is different, and each chooses a strategy that fits their personal goals – whether it’s advancing treatment for diseases prevalent in their family, investing strategically to enhance a pre-existing family business, or making use of their own expertise to select companies in the field where they made their money.  As I mentioned in a recent article, family offices are notably more likely to be specific about which sector of the life science arena they’re seeking to invest in.  However, this tendency seems to dissipate as allocation sizes increase; family offices that allocate over $10m per investment generally consider a broad range of life science opportunities.

Another notable data point from our family office mandates; they’re more likely than other investors to be opportunistic about which phase of development they prefer to invest in.  A full third of these 30 family offices will consider investing in life sciences companies at stages ranging from preclinical development to products on the market.  This flexibility is a huge draw for life science companies raising capital, who need the support of an investor who will be interested in backing them for the long haul. Understanding what a family office wants in this context is the key to successfully courting them for capital. Before you talk to a family office, you’ll have to understand who they are and why they are committed to a particular investment strategy. Most importantly, you must consider whether the family’s goals are aligned with your own.

It’s easy to understand how the personal qualities of family offices make them attractive to fundraising executives.  We often get asked how best to get an investment from a family office. The short answer is that more than anything, it’s about fit. Careful research and a highly targeted approach are the first step towards starting a dialogue with a family office – just do some careful research, pick up the phone, and go outbound.