By Cole Bunn, Senior Research Analyst, LSN
Due to their recent trend toward making direct allocations (as opposed to fund investments) family offices have certainly caught the attention of biotech and medtech entrepreneurs, with many early stage companies keen to add one to their cap table.
Viewed as deep-pocketed, patient capital sources, entrepreneurs tend to have a lot of misconceptions surrounding family offices. Family offices are notoriously heterogeneous; they come in many shapes and sizes and no specific investment characteristics apply to them all. At our most recent RESI event at the MaRS Discovery District, representatives from four different family offices spoke to how they like to be approached, what they look for in an entrepreneur and the importance of the relationship, the types of deals they like to do and what they avoid.
Moderated by Dennis Ford, Founder & CEO of Life Science Nation and the RESI Conference Series, this session featured the following:
- Hugo Peris, Board Member, Salvat Biotech
- Sunil Selby, Managing Partner, Trellis Capital
- Ron Paliwoda, Founder & President, Paliwoda Group
- Sergei Petukhov, Partner, Enso Ventures
Key takeaways from the panel include:
- Tailor your message based on who you’re approaching – do your homework
This point goes for all investors, but goes a bit deeper and is even more important for the family office. First off, you want to make sure you are talking to the right investor or else you’re wasting everyone’s time – it’s unlikely that an investor whose only ever played in the therapeutics space will be interested in looking at an investment opportunity in a medical device or health IT project. That being said, if your technology isn’t in the same sector but is addressing the same indication as one of their portfolio companies or there is synergy between your project and a portfolio company, this should be noted in the outreach. These types of things can go a long way and can’t be uncovered if you don’t research the investor you’re targeting.
- A strong relationship is crucial to securing funding from a family office
Some family offices have professionals manage their money and add structure to their investment process while others are more informal. Either way, since the money is not coming from an institutional fund and family offices typically have longer investment timelines, it is key that the entrepreneur and investor have a good relationship. One investor added that a lot of the deals he’s done begun with a dialogue with the entrepreneur long before the deal was formally presented as an investment opportunity, mentioning that it takes a while to get to know someone and naturally people like to do business with people they like and trust.
- Finding a family office takes work
Family offices are a highly sought after investors for good reason and typically don’t always advertise their investment activity thus uncovering which groups are family offices is not as easy as finding angel groups and VCs. As one investor puts it, “You can’t just expect to wake up and know which family office is interested in the sector you are in.” He further notes that the best way to find a family office is by going to relevant conferences and networking events.
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