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Entrepreneurial Family Office

ENTREPRENEURIAL FAMILY OFFICE

Family Office is existing as a result of an effort of an entrepreneur. Although, their background is entrepreneurship what they do to support entrepreneurs both start-ups or SMEs are not sufficient. Here, it comes “risks” with entrepreneurs, thus, it is a structural problem.

In this article, I am going to explain an experience of an entrepreneur with Family Offices, what “Entrepreneurial Family Office” is and how Entrepreneurship and Family Office could come together. As this is my own experience, my approaching style would be unusual.

First of all, there are two different types of family offices. These are single and multi-family offices. In my article, I am going to focus on Single Family Offices. To start with, a short description of Single Family Office would help us understand them more. According to Forbes, Single Family Office is “an organizational structure that manages the financial and personal affairs of one wealthy family.” Therefore, their all aim is to minimize risks while maximizing wealth of the family. Because of that, it is very difficult to convince them from an entrepreneur’s perspective. Once sources of venture capital/private equity firms are looked, it is going to be seen that Institutional Investors, Single/Multi Family Offices, HNWIs & UHNWIs, Sovereign Wealth Funds etc. are their sources. Thus, if you are an entrepreneur who is raising capital, you are knocking the right doors.

Having a project with high-risk profile, few approaches to Single Family Offices were made by thinking that they could bear with the risk. The project was presented in two different ways, the first one was raising capital with ultra-high risk is involved and second one was raising capital with average risk is involved.

On the other hand, it is rationale that it failed because of the risk profile of the project, however, there was a leverage to prospective investors. It shows that a golden opportunity was seen, although having no any prior experience in the field. This could only be explained through an entrepreneur’s perspective, because they look different and see different.

Furthermore, Family Offices are not able to finance Entrepreneurs/SMEs if they do not bear with the risk. Therefore, although they are willing to do so, they cannot proceed with that. Thus, a financial intermediary is needed to take the role and allow Family Offices to decrease their risk. Thanks to its structure, Family Offices can make investments through that financial intermediary so that Entrepreneurs/SMEs could get funded under approximately 50% of risk coverage. If this happens, there would be win-win situation for both parties while economy finances Entrepreneurs through Family Offices, that means allowing Family Offices turning back to their roots under a risk coverage program. This allows Entrepreneurs/SMEs to have facilitated access to finance both equity and debt financing. In terms of debt financing, loan backed assets having risk coverage could change all the game.

Family offices we approached made their decision based on who we are and risk profile of what we are offering. As we do not have any prior experience in the proposed industry, we could not pass “who we are” test. Additionally, as we were offering a project in an industry which is the most difficult and strictly regulated industry, we could not pass risk profile test either.

Contrarily, big returns happen through this kind of risky investments. As it is well known, if big return is expected, associated risk will get higher given risk-free rate plus risk premium that investors are accepting.

To sum up, any Family Office making investments in Entrepreneurs/SMEs by minimizing their risks is called Entrepreneurial Family Office. Because of aforementioned reasons, Family Offices are not able to touch Entrepreneurs/SMEs directly. Thus, an intermediary to bring them together to touch Entrepreneurs/SMEs directly is indispensable. This also means they are touching the economies as Entrepreneurs/SMEs are backbones of economies. By considering all of these, all institutions are expected to support Entrepreneurial Family Offices. Given the current incentives, we are going to see increasing number of “Entrepreneurial Family Offices” in the near future.

Author: Muhittin Isler

 

About me:

I am 28 years old, dedicated, young entrepreneur who received his undergraduate degree in business administration at “Ozyegin University“ in Turkey and studied “European Economic Studies” with the mention ‘European Economic Integration and Business’ at “College of Europe” in Belgium. I have almost 7 years of experience in business management, strategy crafting and execution as well as media outlet management, business development, blue ocean creation and developing entrepreneurs-oriented products & services. I am credited with the successful launch of GBP TV, an international media outlet I founded in 2012 with the title of “The World’s First TV Channel Dedicated to Entrepreneurs” and represented GBP TV in global markets. Very recently, I tried to create The World’s First Bank for Entrepreneurs but failed to find an investor for the reasons mentioned in my article above. Currently, I am Director at Milsora that aims to produce the highest quality “cold pressed early harvest & extra virgin olive oils” and become a global brand.