Traditional family offices emerge as unlikely venture capitalists

Jed York, owner of the San Francisco 49ers football team, is an early investor in dozens of technology start-ups.

The 42-year-old owes his wealth to sports and shopping malls: his grandfather made his riches in Midwest property before buying the 49ers in 1977. In the decades that followed, the 49ers became one of the dominant National Football League teams, bringing home five Super Bowl championships.

A shrewd $16.5mn investment became the basis of a family fortune worth about $4bn, according to Forbes estimates.

York decided to diversify into technology investing and break into the tight-knit world of Silicon Valley.

“My parents didn’t start a computer company in the 1970s . . . That’s not the make-up of my family,” says York. “There’s a level of entrepreneurship, but it’s not necessarily in what Silicon Valley would look at as tech.”

The fresh-faced York had to work hard to win access to deals after he started a venture fund called Aurum Partners in 2014. To help run the fund, he recruited Brano Perkovich, a technology investment banker with Barclays in Silicon Valley.

As one of its first investments, the fund started a ticketing and food-ordering app for sports stadiums that quickly received backing from Twitter’s venture arm and other strategic investors.

Aurum also made an early investment in DripDrop, a rehydration drink mixture with backing from Hall of Fame football quarterback John Elway.

Aurum struggled to get into deals backed by top-tier venture capital firms, according to its principals. Instead, it heard many pitches from start-ups in stagnating areas such as advertising technology that had found little success raising money elsewhere.

Now, says Perkovich, the fund has few problems securing access to attractive deals — thanks to tight relationships it has developed with top venture capitalists.

He says Aurum has returned more than four-and-a-half times the money it has invested in more than two dozen companies since 2014.  

Three-quarters of family offices surveyed globally by SVB (Silicon Valley Bank) and Campden Wealth said they made venture investments in 2021, about double the share that were striking deals a decade earlier.

The average family office in the survey held direct stakes in 17 companies and 10 investments in venture funds, which accounted for 12 percent of its portfolio.

York says his family is “probably more overweight [in] venture [capital holdings]” than other US family offices, but not compared with those in the Bay Area that have made their fortunes in tech.

Shailesh Sachdeva, managing director of the family office practice at SVB Capital, suggests the York family is not alone: there has been much more participation from ultra-high net worth families whose wealth did not come from technology.

Some family offices have even begun taking the lead position in venture deals, making the largest investment and taking a seat on a young company’s board. 

Mousse Partners, which manages the wealth of the family that owns French luxury fashion brand Chanel, recently helped lead a $32mn investment in Butler Hospitality, a US start-up that operates delivery-only kitchens catering to hotels.

Tarsadia Investments, which manages money for the southern Californian hotel mogul BU Patel, earlier this year led a $140mn deal in credit card start-up Petal.

One of the most active family offices in venture investing is Lauder Partners, managed by Gary Lauder, a grandson of the founder of cosmetics group Estée Lauder.

Its website lists 58 private companies in which it is invested and 41 that have returned the family’s initial investment through sales or public listings. Investments that “did not turn out OK” and missed the cut-off for the website “are the expensive tuition we VCs pay”, it reads.