"Family offices shouldn't even try to do venture capital." 

Those were the words of a prominent venture capital manager at a family office conference last year, arguing that family offices don't have the capacity to do venture properly. 

That might have been true historically, but is it still the case?

Global family office reports show venture accounts for approximately 6% of their AUM (private equity at approximately 20% in total).

Last year PwC reported that family offices ’ share of all venture capital reduced from 31% to 26%. This is still a lot higher than the 17% figure in 2017, suggesting a trend towards growth from preservation.

Venture presents the opportunity to get in on the next unicorn that delivers outsized returns, but it’s about more than this for family offices.

They do want to ride the AI wave and benefit from emerging tech investments, but venture also provides an opportunity for more hands-on approach

A chance to utilize their own operating experience, to involve the next generation, something reflected in how they approach the category.

Rather than rely purely on venture funds, many family offices are pursuing direct access through private networks and communities.

Bank of America reported that of 300+ family offices they surveyed last year, venture investments were split 52% through traditional funds, 44% direct (either on their own or co-investing).

Speaking with venture professionals, it’s clear that as family offices institutionalize, they want more control over their investment opportunities across every asset class.

Johannes Wittmann, an experienced venture CFO/COO and cofounder of Techstone, has seen this shift firsthand. 

He believes part of this stems from their self-belief and experience building successful operating companies that generated their sizeable wealth.

“Families want to pick, they want to pass, and they want to size positions based on their own conviction. A fund allocation can be part of the strategy. But increasingly, families don't want it to be the only strategy.”

Yet he also sees family offices struggle going it alone since most don’t have a dedicated, experienced venture professional to source and execute opportunities that align.

“Most family offices see whatever lands on their desk through personal connections, a banker introduction, or a conference pitch. That’s not deal flow. That’s being sourced. And it's almost always skewed toward whatever sector the family already knows. Real venture sourcing is a volume game with brutal filtering.”

Wittmann says the gap between intent and capability is enormous: it’s much more than writing the check, it’s about everything that should happen before and after it.

“The bottleneck is almost never capital or conviction. It's everything around the deal. Who runs due diligence? Who structures the SPV? Who negotiates the side letter? Who monitors the portfolio afterward?” 

While family offices have become more institutional of late, so has the venture capital ecosystem.

How venture capital is different today compared to five years ago: 

Two years ago we shared the 99 brutally honest takeaways from working in venture capital from the VC newsletter and community Confluence.VC, which has since been updated and is as relevant as ever.

We asked founder Clay Norris how the VC ecosystem has evolved since he first wrote that. 

“Venture capital today is where private equity was twenty years ago: the industry has institutionalized and industrialized through a few cycles, a handful of market leaders are on the cusp of going public, and the asset class has entered the post-abundance regime.” 

Norris predicts that the industry will consolidate to a few incumbent institutions, with a long tail of boutiques.

On the family office side, he’s seen increased direct investing into big-name technology startups, but expressed concern around the use of SPVs to access these.

“Navigating the SPV world is the wild west, and many multi-layer SPVs from rogue syndicate leads are floating around. I think most family offices are smart enough to realize that these are bad deals.”

And while family offices are keen to avoid the fees associated with the fund model, there’s risk involved, and he suggests they take a cautious approach. 

“There is so much adverse selection in this asset class, especially for family offices. Management fees are a tax for a more curated set of companies, but I understand the hesitation from FOs who have their money tied up in dozens of funds with illiquid assets.”

“On the flip side, I have seen family offices personally lose tens of millions of dollars trying to ‘save’ on fees by launching a direct strategy instead of going through funds as an LP.” 

Seeing these sorts of challenges led Wittmann to create what he refers to as a “plug-in VC desk for family offices” service at Techstone.

“When BNY Wealth asked family offices what holds them back from direct investing, the top answers were: ‘too time-consuming’, ‘understaffed’, and ‘need the right operator’. Those aren't problems you solve with a fund or a software platform. They're infrastructure problems.”

Techstone’s plug-in model solves this by fitting within a family's decision-making structure to handle the full execution layer: thesis development, deal sourcing, screening, structuring, and portfolio monitoring. 

“The family keeps every investment decision. We handle the operational workload. The economics work because we've built proprietary tools and workflows that deliver what used to require a dedicated team, scoped to exactly what each family needs.”

His calculations suggest major fee savings compared to the traditional 2 and 20 approach, but it’s about more than that.

“The plug-in VC desk runs on a monthly service fee. No carry, no lock-up. The family deploys directly and keeps 100% of the upside. But the real difference isn't the fee savings. It's getting back the control most families wanted in the first place.”

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