Family offices to VCs: 100:1

I’ve blogged in the past about the advantages of family offices as an investor.

Because they are so private, people tend to think that there aren’t very many of them. We often assume that venture capitalists – who are more visible – are also more common.

It’s time to put some data behind that. Here’s the results:

According to the National Venture Capital Association, there were 462 venture capital firms actively investing in the US in 2010, and a further 329 firms who raised funds in the previous 8 years but were no longer investing actively.

According to the Economist, there are around 70,000 ultra-high-net-worth individuals in North America that have investible assets of over $30M. That means a $100,000 cheque represents <0.3% of their net wealth.

Since a 1% management fee would be $300,000 a year, enough to hire a good person and an assistant to manage your funds, the $30M in investible assets is probably also a good proxy for family offices.

So, if you do the math (tens of thousands vs. hundreds), you will see that there are around 100 times more family offices in the US than there are venture capital firms.

And that’s in the US, the most developed venture capital market in the world! (The US can, at times, represent 80% of all venture capital investment.)

If you happen to be based in Europe (~58,000 ultra-high-net-worths), Asia (~44,000), Latin America (~13,000) or the Middle East (~6,000), then you may find there are closer to 200-400 family offices for every venture capitalist.

Now there may be advantages to venture capital investors, and they will certainly tell you so. And they do often write larger cheques.

If you are only looking for a modest amount of money, family offices may not just be better for you, they are also far numerous. You just need to do the work to find them!

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