BEYOND Expo | How has family office investment strategy changed in the past year?

Though sometimes not as visible, family offices are having an influential impact on the investment industry, as their existence allows the assets of wealthy families to have a positive social impact while generating financial returns.

At the BEYOND Expo 2022 tech conference, held online in the BEYOND Metaverse, Rochel Leah Bernstein, Founder of RLB Partners; Michael Smith, Partner at Regeneration.VC; and Andrew Rubinstein, Founder of Shorewind Capital, joined moderator Robert Grimaldi, CEO at Ad Infinitum, to discuss how family offices impact the tech industry and explore investment strategies for family offices over the next two years.

Andrew Rubinstein, founder of Shorewind Capital

Family offices play a big role in the tech industry, a lot of them are investors themselves in those big VC funds. I think they do that for two reasons: One, for their own sort of investment returns, so they can kind of invest directly in some of the companies that those venture funds will first invest in and identify the winners. So they absolutely played a role, though they tend to be more behind the scenes, because they don’t have to put in as much effort into marketing, one because they don’t have to go invest or they don’t have to go raise outside capital. And two, their value-add is sort of inherent in their family name a lot of the time, so if you’re a small venture fund you sort of have to position yourself to entrepreneurs, to say we can add value by doing X, Y and Z. If you’re a family office with a big name behind you, you don’t really have to make that pitch as much of the time. So they definitely play a big role both in the sense that they invest in many of those companies directly and in the venture funds that source them.

My sense is that family offices are a little bit more sort of risk-off right now. I think part of that is because they don’t know exactly how to value their current portfolio, because if they were investing in round seeds stages, a lot of those companies probably are a little bit overvalued. And because they’re private companies, they don’t really have to get remarks until they go and raise subsequent funds, so a lot of family offices are fairly content to sit on the sidelines right now and say let’s see how the dust settles and kind of evaluate exactly how much our portfolio is right now. For us, we’re a family investment vehicle but we’re also a new venture fund on the block. We launched fourteen months ago and we’re excited that valuations are coming down, we’re also excited that other venture investors are staying on the sidelines a bit more because it means we get more access to deals we otherwise wouldn’t.

As I continue my investment career, I’ll always be someone around the family, I still want to prioritize at the center of that Venn diagram, or drift more to just we’re looking purely for returns. And I think that’s probably something that a lot of family offices deal with because they have flexible mandates where they can invest in anything from an early stage, private to public. So trying to hone in on your vision as a family office, or just as individuals within a family office, I think is pretty key to help kind of guide you towards exactly how you want to spend your time.

Rochel Leah Bernstein, founder of RLB Partners

There’s a risk aversion piece I’m definitely seeing, but the interest in co-invest is very strong. So what I do hear a lot behind closed doors is a desire for people to see each other’s deal flow within families and to sort of share what they’re looking at because there is more trust. The other thing I’ve seen in the last, I would say, two years since Covid-19 is more of an interest in mental health, healthcare, and education, those are spaces that are really shifted. There’s more of a desire to look at edtech and sort of alternative sources of education and more equity around education. From a public health perspective, a lot has changed. I’m seeing more and more offices that are trying to leverage their networks and their resources to solve some really big global problems because everyone was affected. I have a family office friend who came out of Shanghai and was incredibly traumatized by the lockdown. It was shared with me that it had such an effect on his mental health and he is now really interested in some of these spaces he had never looked at before. So I think it left an indelible impact on all of us and how we think about how we leverage capital for social good.

I’ve been passionate about child protection and child sexual abuse prevention and impact investing for years, but I think during Covid-19 I was especially terrified. I use that word deliberately because children globally were essentially locked up, often with people that were hurting them, whether that’s domestic violence or child sexual abuse or poverty or other issues. So I believe that we’re going to see a tremendous uptake in reporting child sexual abuse globally within the next fifteen years. Considering the average length of disclosure of seventeen years, I believe we’re about fifteen years out from a massive crisis. And in such an anemic space, I’ve sort of doubled down on my focus on both raising dollars for advocacy and for lobbying, legislation, and parent education, because I do believe that parents ultimately sit at the nexus of all of the institutions and all of the places that their child exists.  So I feel called to really spend a lot of my time and energy on [the issue].

And it is global, I was actually in Asia recently and someone approached me and said you know I looked you up and we don’t know how to talk about that here and it’s not a topic that we know how to address. And it really hit me very hard, sort of emotionally, thinking about how many children and how many families were affected by Covid-19 from a safety and a mental health perspective. The other thing that we’re seeing increasing worldwide is also suicide and adolescent suicide, and so for me, those are areas that I spend a lot of time on, from an investing perspective, advocacy, and philanthropy.

The last thing I’ll say is that I think we really need to focus as an investment community on unity. We see so much divisiveness and so much heat in our world. I know it sounds cheesy, but whatever ways we can come together and bring our stories and our cultures and what unites us as humanity together for the planet, for humanity, for human health, for our children, for the future, is something that I think would be incredibly important for all of us as family offices and investors and philanthropists to be focusing on.

Michael Smith, partner at Regeneration.VC

When you look at all the different places that family offices invest, it’s a big question. But from our day-to-day within climate tech, it’s actually become a very good time with this recent climate bill, with a lot of momentum on corporate and regulatory, tailwinds.  So we’re seeing a flood of interest coming in and people wanting to learn more and how do they get smart and how do they figure out who are the right managers and the right opportunities to focus on, and where things are really headed. So there are a few bright spots, but overall there’s just a whole heck of a lot of uncertainty and most family offices have that ability to be long view.

I remember a few months back before things were getting really choppy, it was like “oh I’m so over-indexed in venture” because I’m having all these good outcomes and I’m just trying to figure out how to get a better balance to my portfolio construction and things like that. This is changing day by day, but right now it’s been exciting to see all the interest with what we’re doing within the family office community.

We won’t change how we’ve been doing things in the next 12 to 24 months. When I started focusing on the same issue, I got to know what was happening with this crisis in a way that really motivated me to fully focus on doing everything I could to address it. Regeneration in our work with pine valley is really an expression of that, and it’s not a short-term issue. This is very much a long view issue, so our goal is thinking how over the next 10, 20 years, how do we move the needle on putting atmospheric carbon back into natural systems and regenerating, planning, and building more resilient structures and adapting to changes were already feeling right now. So the time is not to slow down now depending on all the different indicators and where they’re going. This is really urgent and important work that we do take it very, very seriously.

The post BEYOND Expo | How has family office investment strategy changed in the past year? appeared first on BEYOND EXPO.