Raising capital from family offices

Growth Focus Finder: How Family Offices Scale Founder Businesses

Growth Focus Finder: How Investors & Family Offices Leverage NextGen, Roots & Models to Scale

Family office principals, search investors and first-time capital raisers who want to see how experienced investors pick, scale and screen deals.

Summary

Panelists at a Family Office Club event described how they back founder-led companies in the lower middle market, with enterprise values of 20 million up to 100 million. One example was a $50 million HVAC company where the owner was the entire sales team. Kyle said he keeps the founder in place and adds EOS, an outsourced CFO and weekly accounting, then checks return on invested capital first.

The panel also covered sourcing deals through grassroots relationships, spot checking deals with a 12 item checklist, and using AI for recruiting. Neil screens for managers with 10 years of success and said recovery matters more than return. He also raised nextgen wealth transfer, citing about 35 to 40% for the next generation and about 12% for the third. Kyle closed by urging investors to measure return on engagement.

5 key takeaways

1. Buy companies the founder has outgrown. Kyle favors businesses where the founder is the bottleneck, doing sales and hiring. He keeps the founder involved, and in his experience some founders like to take some value off the table, while he installs tools to scale.
2. Systems matter as much as people. Kyle said investors used to back people, but now need to back the person and the systems that grow and scale. He named EOS, Loom and a similar operating tool as easy to implement.
3. Check return on invested capital first. Kyle looks at this number before most others. At 50%, a company earns 50 cents of operating return for every dollar invested in it. Kyle said his own business runs at 200%.
4. Deal flow comes from relationships. Lane finds deals through general partners, vendors and brokers he has worked with before. Some of these partners bring family office portfolios and share deals with him.
5. Plan for the next generation. Neil said making money matters, but many families also think about how wealth is passed on. Kyle added that investors should measure return on engagement, such as whether customers would stay after a 50% price increase.

Worth quoting

Facts and figures

• The panel's lower middle market target is enterprise value of 20 million up to 100 million.
• Kyle said his own manufacturing business has a return on invested capital of 200% and is valued at $40 million.
• Lane's checklist has 12 quantitative checks, and his team reviews about a couple dozen deals a quarter to find one good deal.

General education only. Not legal, tax or investment advice.

Talk to a securities attorney to explore options around founder equity arrangements, wealth transfer planning and acquisition deal structure. Do not use AI to write your own legal agreements.

Related questions

• 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.
• 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.
• What deal sizes do family offices typically write?There is no single typical size.

Questions about this video

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