Raising capital from family offices
What is the difference between single and multi-family offices?
Short answer
A single family office works for one family and is built the way that family wants. A multi-family office works like a wealth management firm for many ultra wealthy families. The single office gives you more control and no third party management fees, though you carry the cost of running it. The multi-family office gives you shared experts. For capital raisers, one multi-family office can mean many investors at once.
A single family office works for one family. A multi-family office works for many. That is the core of it. The day to day differences show up in cost, control and how you approach each one as a capital raiser.
Who each one serves and how big they get
I describe three types of family offices. Virtual family offices are very lean, small single family offices that outsource almost everything to keep expenses low. Single family offices can have a couple of employees, or five, or ten, or a hundred plus. That can fit someone worth 50 to 100 million dollars, all the way up to hundreds of millions or billions.
Multi-family offices are like wealth management firms focused on the ultra wealthy. They target people worth 7, 10, 20 or 50 million dollars plus. They might serve 10 of those families or 200.
This clip walks through the three types of family offices and who each one is built for.
Summary and key takeaways from this video
Control, cost and the trade offs
A multi-family office knows the problems of people worth 10 to 50 million dollars. That means multi-generational planning and the financial questions that come with big transactions and an exit. The service is customized to that kind of client, not to one person.
They also bring a bench of experts. You might not donate money every year, but they may have a philanthropy expert on staff, which could cost something like $300,000 a year. That cost is typically covered by the fees you pay the multi-family office.
"If you run your own single family office, there's no fee you're paying to a third party. It's your own organization that you've created for yourself."
With a single family office you build it the way you want. If all you want to buy is laundromats, your whole team can be dedicated to that. You can outsource public market wealth management to a multi-family office or a banker you trust. There are trade offs on both sides.
Panelists describe both models, including one who set up a single family office after a business exit instead of handing the money to a multi-family office.
Why the difference changes how you raise capital
If you raise money, this distinction changes your math. A multi-family office may represent 20, 50 or 100 clients. If you win over one chief investment officer or one investment committee, they might in some cases bring 10 or 30 investors into your deal. In my experience that can mean raising 10 to 50 million dollars at a time.
A single family office is one family. You are usually winning over one decision group for one pool of money. That can be faster, but the check is often smaller.
The price of the bigger check is a more thorough process. Expect checklist style due diligence, like a wealth management firm would put you through. I suggest building a master due diligence questionnaire. You answer the most thorough version once, then reuse and improve it each time a new question comes up.
Here I explain why multi-family offices are a different target than single family offices and how a master due diligence questionnaire helps.
We know a Family Office Club member who raises capital 20 million or 30 million dollars at a time by winning over registered investment advisors. These are typically high end wealth advisors or multi-family offices. They raise about 80 million dollars a year now. We knew them when they were at zero.
Many sponsors talk to a securities attorney before they approach either type of office.
From my book
One difference shows up in the room where decisions get made. A multi-family office or wealth management firm might have more than a dozen people on its investment committee. Most single family offices only have three to five permanent members, and the chief investment officer usually leads those meetings and coordinates between them. So when you pitch a single family office, plan for a smaller group and make sure the person leading the meeting can explain your deal to everyone else.
"While a multi-family office or wealth management firm might include more than a dozen people on an investment committee, most single family offices only include three to five permanent members. The single family office's chief investment officer will most often lead these meetings and coordinate between the different members."
Facts from this talk
- Multi-family offices target families worth 7, 10, 20 or 50 million dollars plus and may serve 10 of them or 200.
- A single family office can have a couple of employees or a hundred plus, fitting families from roughly 50 to 100 million dollars up to billions.
- Winning over one multi-family office can mean raising 10 million to 50 million dollars at a time.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Why Do Investors Want A Family Office? - PODCAST - Family Offices & Family Office Club, Benefits of Closing Deals Using a Master Due Diligence Questionnaire, Meet the Panel: Centimillionaires, Family Offices & Investors Behind Major Deals. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around offering documents, investor eligibility rules and fund structuring options. Do not use AI to write your own legal agreements.
Next moves
- 1Decide whether you want a single family office, a multi-family office or a lean virtual setup for your own wealth.
- 2List what you actually need from a team before you pay for experts you may not use.
- 3If you raise capital, consider targeting multi-family offices once you have a track record of smaller checks behind you.
- 4Build a master due diligence questionnaire before you approach wealth managers.
- 5Consider talking with a securities attorney about your offering approach.
More questions on this
Which type of family office costs less?
A single family office usually has no management fee paid to a third party, so the costs are largely what you choose to have. A multi-family office charges fees that also cover its shared experts. There are trade offs on both sides.
What is a virtual family office?
It is a very lean, small single family office that outsources almost everything. The goal is to keep expenses low while keeping the functionality of a family office.
Why do capital raisers target multi-family offices?
One multi-family office represents many clients. Winning over one investment committee can lead to 10 or 30 investors in your deal.
Related questions
- How do I find the decision maker at a family office?Start by meeting the family through advisors, events and the people who manage their investments.
- Do family offices co-invest alongside other investors?Yes, many family offices invest alongside other investors, and they often feel more comfortable when another respected investor is already in the deal.
- What deal sizes do family offices typically write?There is no single typical size.
- How long does a family office take to make a decision?There is no standard timeline, and I would not trust anyone who gives you one number.
Work through it with the how much to raise calculator. See all raising capital from family offices resources.