From Allocators to Acquirers: The Family Investing Model and Transgenerational Entrepreneurship

The ability to pass along entrepreneurial spirit and related skills has been the linchpin of success for generations of family firms. Historically, this has been achieved by moving in and out of businesses to capitalize on opportunities to harvest capital and to ensure the business portfolio remains profitable and competitive. Families who are successful have also accumulated liquid wealth along their journey and have often created a separate entity to manage that money: the family office. Today we are witnessing a large movement from the family office toward a family investment company approach. In the words of one family investor, “Families are moving from allocators to acquirers,” deploying their capital directly into operating entities rather than allocating it across a range of asset managers or investment funds. This chapter introduces a new model for how families achieve transgenerational entrepreneurship, through a broader-scope investing model focused on direct investment. We will describe the motivation behind the Family Investing Model, explain its related dimensions and challenges, and illustrate it with stories from multiple families that have proceeded down this path, reaping the benefits of family investing while managing associated risks.