Tech entrepreneurs and family offices: Collective might

Iconiq Capital’s reputation precedes it: a client list (Mark Zuckerberg was an early addition) that encompasses wealthy individuals ranging from start-up founders to leading financiers; a remit that starts with wealth management but could include all manner of family office services; access to funding rounds for the most in-demand tech companies thanks to its all-star network; and alleged conflicts of interest that would probably sink a more traditional operator.

There is – as far as AVCJ is aware – no equivalent business in Asia that has achieved the same level of name recognition. But the idea of banding together successful internet entrepreneurs and leveraging their collective wealth and influence to make investments is certainly being explored in the region.

Jeneration Capital, a Hong Kong-based multi-family office that manages about $2 billion in assets primarily on behalf of tech founders, fits the profile well. This week the firm recruited Jason Tan, who previously led investments in the likes of Didi Chuxing, Grab, and Meitu for Tiger Global Management, as a partner and CIO. Tan spoke of combining investment experience and relationships with local entrepreneurs “to bring a fresh perspective on how an investment firm should work.”

The nature of the alchemy is never entirely clear in these situations – notably, the extent of the collaboration between the entrepreneurs and the professionals they are paying to manage their money. Indeed, the dynamics might vary for different deals. Samena Capital is a PE firm rather than a family office, but it is a useful case in point. The firm is backed by a group of influential shareholder-investors who own part of the GP and invest in the funds alongside traditional LPs. While they also assist on deal origination and portfolio company support, these contributions evolve naturally rather than by fiat.

Beyond deal sourcing and post-investment value-add, a family office might have a different perspective on time. The limited holding periods hardwired into the closed-end funds used by  private equity and venture capital firms need not apply. Under an evergreen structure – said to be used by Jeneration Capital among others – they can remain involved for as long as they feel it is necessary.

General Atlantic (GA) is arguably the preeminent model in this respect. The firm was founded as a family office and it now manages around $24 billion with family offices making up more than half of the client base. GA’s key advantage is a critical mass of capital. While the firm does raise traditional closed-end funds, most of its capital is in managed accounts and evergreen structures. They are sufficient in number and varied enough in vintage that GA can meet its investment needs on an annual basis. The firm can also exit whenever it likes, recycling capital for long holds.

This flexibility might be something to which Asia’s new generation of family offices aspire, but it is also the product of a mature ecosystem. While there are benefits to being part of the GA network, the firm is run on an institutional basis. A team of professionals makes the investment decisions and the family offices are essentially passive. Collaborative capital wouldn’t be an appropriate description.

In markets like China, where tech entrepreneurs are usually still very much involved in their businesses, passivity is not an option. Even if individuals are investing alongside their peers, any one of them could find his or her interests conflict with those of the manager or the rest of the group because of actions taken by other entities over which they have control. The factional nature of the internet industry adds to these complications.

In the long term, Asian family offices will follow a similar developmental path to their Western counterparts as founders give way to the younger generations, ties to operating companies loosen, and diversified asset allocation models come to the fore. Until then, though, entrepreneurs will continue to find ways – individually or collectively – to make their presence felt in technology investment.

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• Topics
• Greater China
• LPs
• Technology
• China
• TMT
• Family office