Besides calling the Ghostbusters, how does one catch a ghost? That is the question asked by most life science companies trying to raise capital from family offices, which we define as a non-institutional investor capable of investing $1M or more into an individual company. Family offices want deal flow but at the same time they often want discretion and to be hidden from view. They don’t want to be “sold.” This hurdle is tough to overcome but is doable. In our 5-step “how to” guide, we’ll share some secrets on how to connect with family offices to get your company funded.
1. It pays to be charitable
Philanthropy is important to the vast majority of family offices. Most of these families have a cause or causes they support, which includes often not just giving money but also attending events. Galas or private donor events are often frequented by family office investors. If you are running a company in a space where there is a successful disease foundation, get involved in the foundation both as a source of credibility but also as a means of meeting investors who are most likely to have a passion for the product that are you developing. Sometimes there are situations where the foundation has an economic incentive to introduce you to their donors. Attending the galas, but not being a pushy deal promoter is critical. Even charities not connected to the life sciences often have family office investors, most of whom have some connection to a medical related charity. It is not hard to figure out the big donors in each charity as most publish this list.
2. Alma Mater network
Undergraduate and/or graduate degrees are more than just pieces of paper to hang on a wall. They are also vast networks of alumni many of whom are doing very interesting things. Some of these alumni have been very successful and choose to give back to their schools in gratitude for helping them get their start. Most universities have online alumni directories and local alumni clubs as well as annual homecomings and reunions. These online and offline resources are opportunities to establish relationships with family office investors. Moreover, they are more likely to be predisposed to invest because of that common connection. The more involved you are as an alum and the more “right” events that you attend, the better your odds of success to meet investors.
3. Go clubbing
This might be a bit old fashioned, but family office investors are often members of various golf, tennis, social and other clubs. While never the primary objective of joining a club, many business deals get done between members of these clubs. In many ways it signals that you are on the inside and one of them when doing a deal rather than an outsider who is asking for money. Playing golf, while seemingly anachronistic, has benefits in building relationships with family offices. If you belong to a nice club that would attract other investors to want to play with you, that can be a magnet to build these relationships.
4. Consiglieri
Everyone has a circle of people that they trust. Families are not only no different, they are more intense about dealing with people they trust. They often have gatekeepers, confidants and trusted advisors who they rely on to both bring them deals as well as vet the deals they see. Wealth management professionals (multi-family offices and private bankers), accountants, estate attorneys, and family office professionals (in a single-family office who are not members of the family) all play this role. While the family member might want to be invisible, their network of advisors is how they often interact with the world. Getting in with one of these people is often the path to meeting the wealth creator or decision-maker in the family unit.
5. Hire a well-connected connector
This is a tricky space with almost everyone posing as a family office connector with their hands out for a percentage of the deal in cash and stock. Many professionals at single or multi-family offices do this in their spare time introducing clients to their friends in the network. Some of these people are quite well connected and highly successful at raising capital by these means. Before one engages such a connector, be sure to call references and speak to investors who have successfully invested in one of their deals to get the proper perspective. This has the potential to be the quickest and most powerful way to raise capital but also is full of the most pitfalls. Be prepared to also pay higher than usual placement fees for this service since this market is so fragmented and difficult to access.
We have one bonus feature of what you should NOT do.
- Conference commandos
With few exceptions, attending conferences as either a sponsor or high-priced attendee who was promised to meet a certain number of family offices is often a fool’s errand. There are some success stories here but often these conferences are comprised of other companies looking for the same family office investors that you are seeking. Most people with whom we interact are disappointed at these events and feel they wasted their time and money. If you have attended one of these events and had a positive outcome, please email me, and I’ll be sure to share.
Locust Walk has cultivated relationships with many family offices who value our objective advice and execution as it relates to helping them grow and exit their life science investments. If you want to learn more about how we can help a family office-backed company achieve success, please reach out to me (geoff@locustwalk.com).
Written by Geoff Meyerson