The results of an exclusive report by Silicon Valley Bank and Campden Wealth into venture portfolio investment found that family offices are investing in specialist, diverse and female-led venture funds. 80% of family offices are making venture investments in impact-focused funds and start-ups.
Jennifer Steans, President and CEO of Financial Investments Corporation and senior member of her own family office gives her insights into the report’s key findings.
Silicon Valley Bank and Campden Wealth’s report, Family Offices Investing in Venture Capital, found that 79% of family offices are making venture investments in impact-focused funds and start-ups. 64% indicated climate change as an area of interest. Do you think this increase is a result of the next generation pushing for change?
“I think some families fight it - and I know fighting is the right word - because they've been so successful [in the past]. Change is hard but you want to make sure that the next gen appreciates the history of the family and where it came from. I think it's going to be an interesting transition that families go through to honour the past and really change how they're thinking about things, given where the world is today.”
Do you think ESG (Environmental, Social, and Governance) and Impact Investing will become an increasing focus over the next ten to 15 years?
“I think impact investing is here to stay, I think we're going to get a lot more knowledgeable about it and understand there are certain categories where you should be going for above-market rate return. We need to be very clear when we're doing that versus when we're going for below market-rate return, because you're doing that investment for a different reason. It's still a very much purpose investment and I think you need to be very clear, otherwise it could cause a lot of challenges when people say, ‘Well, you're not going to get the same returns’. I think we've got to get a lot smarter and better with different investments. It's shifting but we're talking about it, at least in our family.”
The same report also found that family offices are interested in growing specialist, diverse and female-led venture funds, with 63% involved with ethnically-diverse general partner investments and 68% with female-led GP investments. From a business point of view, do you think investing in these areas creates an opportunity to find untapped business leaders?
“Oh, absolutely. We have launched a new fund, called 5th Century Partners [a private equity firm that partners with lower middle-market businesses to accelerate growth by harnessing diversity as a strategic advantage]. We’ve spent months helping find all-black general partners. Our focus in this case was a black-led lower middle market fund, that will focus on the black entrepreneurs and products focusing on the black community. It's a very focused demographic approach trying to generate above-market returns. There really is demand for doing it and there is a competitive advantage. Their deal flow is completely proprietary, and much better and deeper than we expected. I think it's just going to keep going that way.”
How is your family office investing in this area?
“I want to see Chicago thrive because we're a Chicago-based family and the city has been very good to us. We have a foundation that's focused on West Side neighbourhoods here. We have very intentional strategies around that. We created what we call the Arena Fund where we can go into much smaller bite-sized pieces with a number of entrepreneurs who are Chicago-based women and people of colour to try to support the ecosystem in a different way than we normally would with our family office - we've got to make sure we're getting to 25% IRR [Internal rate of return], metrics etc.
“At least from my family perspective, and I'm hoping and thinking a lot of families are getting there, we're thinking about our balance sheet differently now. I think families are thinking about more impact, they're starting to use this kind of investment portfolio as a way to figure out what they can do. So I think you're seeing a lot more going on in that direction. I think that trend is going to continue big time.”
For more information on Silicon Valley Bank and Campden Wealth’s Family Offices Investing Venture Capital report, click here.