Entrepreneur Office Hours - Issue #77
Since Iâve mentioned it a few times, you might already know my favorite course to teach is social marketing. Because of that, I spend lots of time researching and studying social media. And, no, I swear thatâs not just a convenient excuse to justify spending hours scrolling through Instagram, Twitter, and Reddit.
Whatever. Donât @ me.
Anyway, the point is, Iâve spent the past couple of years studying â or âstudyingâ â TikTok while trying to figure out how to use it as a tool to present content about entrepreneurship. Itâs a bit tricky because TikTok is a visual platform and entrepreneurship isnât a visually compelling subject. After all, who wants to watch videos of someone staring at their customer acquisition metrics or sending cold emails?
Still, I feel like I really need to give it a shot. So Iâve finally taken âthe leapâ and launched a TikTok account. Check it out! And follow! And like! Watch all videos hundreds of times so it tickles the algorithm and makes me TikTok famous.
Thanks!
-Aaron
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Office Hours Q&A
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QUESTION:
Hello Aaron,
Iâve got a term sheet and am looking to go into due diligence with a âfamily office.â I was wondering if you had any experience taking investment from a family office and whether or not you knew of any advantages or disadvantages.
- Arnold
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First, congrats! Getting a term sheet is great.
As for the advantages and disadvantages of a family office, I suppose I should start by explaining the term for anyone reading who isnât familiar.
Family offices are wealth management firms for Ultra High Net Worth individuals. In other words, some people are so wealthy, they basically have entire companies working for them just to help them manage all that money.
Must be nice, huh?
Anyway, part of that money management involves making investments. And, when youâre talking about someone with a few billion dollars in the âole piggy bank, it means the person can afford to drop $100 million into what is, essentially, a personal VC fund.
Full disclosure: Iâve raised money from a family office. My personal experience was that it was very similar to pretty much any other VC except a bit less formal and bureaucratic. However, I canât say with any certainty whether that would be the case across the board. I suppose it depends what family offices youâre raising money from and what VCs youâre used to raising money from.
Overall, my sense is thereâs not a huge difference. Certainly nothing unique to be concerned about. You just need to be careful about what deal terms you accept since the investment terms are going to be the thing that impacts the overall relationship and experience more than anything else. And, of course, thatâs true of all capital you take regardless of where it comes from.
The only major consideration might be the resources/support a family office can give you beyond money. Again, this will all vary from office to office, but a major VC firm is probably going to be more fully geared toward supporting entrepreneurs in other aspects of their businesses (e.g. hiring) when compared to a family office thatâs busying itself with lots of other things. But, again, some family offices are going to be better than others, just like some VCs are going to be better than others.
The last distinction Iâd note is that family offices usually have a broader range of investments because their investment thesis isnât as restricted by the terms of their funding source. That doesnât matter much to you, Arnold, because you already have a term sheet; however, if youâre reading this and donât already have a term sheet, family offices might be a good way of expanding your potential investor pool, particularly if youâre in a market segment that doesnât have as many investor options.
Got startup questions of your own? Reply to this email with whatever you want to know, and Iâll do my best to answer!