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The New Economy family office upstages the Old Economy family office

A new family office model has emerged and it’s rapidly setting the scene for the sector in the 21st century.

The new model is all about the latest technology and youthfulness. And it’s often about a lot more assets than the old economy model, which makes the new economy family office even more powerful and influential. 

The new economy model is personified by tech entrepreneurs and the next generation of family business dynasties. Tech entrepreneurs like Nick Storonsky, the co-founder of the fintech group Revolut, is worth more than $7 billion and has just set up a family office. 

It’s not too much of the stretch of the imagination to say that at least 500 new family/principal offices have been set up in the last eight years

And next gens like James Murdoch, a scion of one of the best-known family business dynasties on either side of the Atlantic, the Murdochs. James set up his family office, Lupa Systems, just two years ago. 

The momentum for this new economy family office is, of course, the venture and tech worlds, which have mushroomed in most economies in the last 10 years. 

The numbers speak for themselves. There are now more than 750 so-called unicorns in the venture world – startups worth $1 billion or more – compared with just 12 eight years ago. How many of the founders of these unicorns have investment offices? Family Capital estimates about half of them. That’s as many as 375 new single-family/principal investment offices set up over the last eight years. 

Add the number of investment offices/funds set up by the next generation of family business dynasties in the last eight years, which means probably an additional 150 family offices, or similar groups. OK, these are rough estimates, but it’s not too much of the stretch of the imagination to say that at least 500 new family/principal offices have been set up in the last eight years. 

And what do most of these owners of these new family offices have in common? They’re all owned by people less than 50 years old. Many are owned by 30-something Millennials, like Storonsky, who’s only 37. 

This age cohort owning so much wealth and having their own investment office to manage that wealth is a new phenomenon. Previously to the venture and tech boom, individuals and families set up most family offices in the 50s, mostly by people in their 60s and above. 

Another important point in the evolution of the new family office is that the next generation of the old economy family offices isn’t necessarily going to either work or be direct beneficiaries of old investment structures. Instead, many will set up new family/principal investment offices or venture funds, like James Murdoch and many others Family Capital has mentioned in the past

Of course, the old economy family office, which usually emerged from a liquidity event after years of hard work, sometimes by multiple generations of one family, isn’t going to disappear. On the contrary, many will prosper for years to come, some even will bring the next generation into the fold, and they will continue to diversify into the tech and venture world. Other family offices will be linked to old economy operational businesses that will deliver dividends for years to come that will fuel the family office investment pot. 

What do these new family offices stand for beyond their infatuation with the latest technology innovation and their youthfulness? They will want more control over their assets than old economy family offices. They won’t use funds as much as their old economy counterparts, but instead, concentrate on investing directly.

Many will be motivated by purpose-led investment themes, like improving environmental outcomes for their communities and the world. They will help to realise new economic outcomes through embracing cryptocurrencies, the blockchain, and even quantum computing. Some will even help push for an interstellar existence. 

All this will mean the new economy family office will increasingly be the benchmark for the sector – and much of the old economy family office world will have to follow that benchmark or contemplate extinction. 

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