Good morning, it’s Finance editor Jeff Roberts tagging in for hardworking Allie. Did you know Mark Zuckerberg, Reid Hoffman, and Sheryl Sandberg all share an office? Well, technically a family office. The trio of billionaires, along with a few other tech moguls, all rely on Iconiq Capital—a so-called multi-family office—to manage their wealth.
This was one of many interesting tidbits I learned while reading this fine new Fortune feature about family offices, which—despite their folksy sounding name—are some of the most wealthy and sophisticated entities on the planet. And their scale and influence is growing. Oil baron John D. Rockefeller founded the first one in 1882 and, after a century occupying a quiet corner of the financial world, they began to take off.
To get a sense of just how big family offices have become, there are now over 8,000 of them managing more than $3 trillion in assets, up from 6,130 just five years ago—and that's only counting single-family offices (versus multi-family offices like Iconiq). They are also major players in the venture and broader investment world.
Family offices do a lot of things—from estate planning to smoothing out riffs between cranky patriarchs and ungrateful grandchildren—but their main raison d'etre is to create and preserve wealth across generations. This expansive investing horizon also makes them a natural partner for the venture capital world, as the Fortune feature explains:
They take on greater risk with these illiquid investments, ideally, to achieve greater potential long-term returns. And because many family offices are operating over time horizons of 50 to even 100 years, they have a much longer timeline to wait for riskier investments to pay off.
That's made them critical sources of capital for private equity and venture capital: Nearly a third of startup capital worldwide in 2022 came from family offices, according to a 2023 PwC report. In the past year, buzzy startups like Perplexity AI have received direct investments from the likes of Bezos Expeditions, the single-family office of Amazon billionaire Jeff Bezos.
Currently, 52% of family offices invest in venture capital and that figure is likely to grow. This provides family offices with the chance to reap outsize returns, but it also provides venture and private equity firms with a new source of capital to round out mega-funds. According to Myles Milston, cofounder and CEO of Globacap, the “longer tail of family offices” may now make up 20% or more of a $5 billion fund—something that would have been inconceivable even a decade ago.
At a time when many nation states are drowning in debt and wrestling with political turmoil, it’s also easy to imagine larger family offices flexing their influence in geopolitics—in the same way sovereign wealth funds have for years. Though don’t expect the same level of transparency as some country funds since the other defining characteristic of family offices is a high degree of secrecy.
And for any readers contemplating a family office of their own, Fortune also has a companion piece that explains how they operate and what sort of dough you’d need to get started. Be warned, though, that the smallest of these entities hold $50 million in assets—so you may need to scratch together a few more nickels before Mark and Sheryl will find you a corner in their office.
Musk OpenAI update...We finally have some firm details regarding Elon Musk's unsolicited $93.75 billion unsolicited offer for OpenAI, now that the official letter of intent was filed in court. As Jessica Mathews reports, Musk and his band of investors are promising to pay all cash, with no debt financing required. (If you're wondering how, you're not alone). Other interesting nuggets: Musk wants access to OpenAI's books, including financial projections "with a focus on the key drivers of revenue growth and EBITDA," in order to conduct due diligence. And he has set a May 10 deadline for OpenAI to accept or reject the deal.
Jeff John Roberts
Email: jeff.roberts@fortune.com
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