Profile: the gaming family building a hybrid Family Office

This week, it’s another family office profile

👨‍👩‍👧‍👦 The Family Office:

Location: US

Original wealth: gaming

Family office type: SFO/MFO hybrid

Generations: 2

AUM: 9 figures

The Family Office

“I'm 2nd gen of our family. We have an active operating business and the family office started with real estate and related company incubation embedded in the operating company. The operating company is in the regulated gaming space

In my MBA program, I learned what a family office was and returned to the business to start one. For ego reasons, I wanted to have a Single-Family Office, but realized the Financial Talent for our operating business didn't translate to capital allocation, and we weren't getting best-of-class expertise or investment access

I selected an SEC-registered multi-family office, which now does our private and public unrelated investments. I run our direct Commercial RE and a Pre-seed & Seed Emerging Manager fund. We don't release AUM - but I can say it's in 9 figures

1. 30-100m

2. 101-500m ← we're here

3. 500m-1b

4. 1b-10b

5. 10b+

The Asset Allocation

Our investment focus really is family first. My parents (1st gen) are still focused on the gaming business, so capital is allocated to development projects there, I wanted to personally allocate to venture, so we heavily allocated to our venture fund

Our MFO does most of our portfolio construction and manager selection, so I would consider that outsourced to balance out what the family wants to do themselves

The other family-sourced investments are mostly in Real Estate Private Equity. My parents are immigrants from a country that is heavily Real Estate focused. I think that's a trend for families from countries with weak rule-of-law and capital markets, investing in tangible assets as opposed to securities

The Challenges

Honestly the biggest challenge for earlier generation family offices… is still family dynamics

Having business-focused discussions has been challenging with some relationship dynamics, which we actively work to improve

I believe this is missed by most service providers, since we went through our estate planning process 3 times and bankers and lawyers kept missing the family dynamics - the final planning process was successfully executed thankfully due to our family business consultants being involved

A Cautionary Tale #1

A competitor in our main market came to us with a private deal within the same industry in an alternate market. It was our first non-RE deal, and our attorney ran a Uniform Commercial Code (UCC) search in jurisdictions the the seller and asset were located

Post-transaction, a previous buyer that had the deal fell through but had already wired the funds issued a UCC in their location, which was missed. We ended up paying double for the business. I learned a lot about diligence that way - and it's a forewarning for family offices, just because you know the industry, doesn't mean you know how to transact

Also, a $2m deal is not much less work than a $20m deal, and partners can sometimes be great help as their expertise is worth more than the preferred equity payment

Planning for the next generation

So I am this next-generation

I would say the largest impact to not only our business but our lives has been bringing on a well-qualified family business consultant. Sadly, there is not a certification for a family business consultant that understands the tools, structures, but most importantly, emotional family dynamics that are important in families and business

It is due to their support that I started cognitive-behavioral therapy to understand the effect my upbringing had on my mental health and how to improve it to show up to the family and business in a much calmer, clearer and objective way. It was more important that my M7-MBA

Cautionary Tale #2

When I started my direct allocation journey, I spoke with a dozen family offices already investing in the space. One such FO had a "CIO" straight out of college for their $X00m+ office. They had done dozens of deals and gave me great advice. The CIO was launching their own fund with outside capital and as a measure of support and gratitude, I allocated a small check

One year later, no communication on fund updates, K1s are 4 months late, a partner has left, and they realized they didn't want to deal with outside investors. The FO buys the venture fund investors out for a significant markup

Moral of the story - Family Offices are a broad range of sophistication - you never know when you'll run into the 20-something-year-old writing $10m checks”

 —————

🙏 A huge thanks to my guest contributor this week. It’s always good to hear from people on the front line

There are more family offices on Twitter than you may think. They usually don’t advertise who they are. But they are there, quietly learning, engaging and networking

If you would like to share your family office story, just reply to this mail

𝕏 highlights

Simple question, not a simple answer:

How to spot a family office on 𝕏:

An Easter tweet

And a public service tweet from 1 April

📚 what to read

This week I have been writing checklists for a role I am outsourcing and was reminded of the great book: The Checklist Manifesto by Atul Gawande. From medicine to disaster recovery, checklists can lead to major improvements in performance - Gawande makes a compelling and entertaining case for codifying complex tasks

📻 what to listen to

I am mildly obsessed with Succession. As with most great TV shows, there is an accompanying podcast. HBO’s Succession Podcast goes behind the scenes in every episode. There are interviews with the stars, the writers and subject experts

📺 what to watch

An Introduction to Valuation by Aswath Damdaran

• Valuation is simple - we choose to make it complex

• Every valuation has a story - a good valuation is more about the story than the numbers

• When valuations go bad, it’s not because of the numbers. It’s because of bias, uncertainty, complexity

📰 family offices news roundup

🔗 Family offices slow capital allocation to private equity

🔗 These 10 Cities Have Most Number Of Billionaire. Hurun Global Rich List - NDTV

🔗 Dubai prince reaffirms HK family office - Weekly Digest

🔗 UBS Private Wealth Management hires William Wright and Matthew Hoffman in New York City - Morning Star

🔗 Singapore’s Wealth Management Status Challenged - FINews

🔗 5 Things Investors Need To Understand About Alternative Investments - Forbes

And finally…

One advantage of 𝕏 is that there is an immediate feedback loop

You say something incorrect or stupid and someone is helpfully on hand to tell you

The same is not true for newsletters

It can be like shouting into the void

So I want to hear from you. What topics do you enjoy hearing about?

Hit reply to this mail and let me know what you like, what you don’t like, what you would like to see more of

One suggestion from a reader was to add an RSS feed. So that’s done

I look forward to hearing from you

X

𝕏 @MrFamilyOffice

✉️ [email protected]

📶 RSS feed