Doing business with a single-family office (SFO) is not an easy proposition, even finding contact information for an office principal can be a daunting feat. There is a tension in how you think about family offices. Like Willie Sutton remarked about banks, you cannot disregard them entirely simply because “that’s where the money is.” But at the same time, their reclusive and nebulous nature makes dealing with them even more challenging.

What I would like to do today is review the family office marketplace in aggregate, and then offer you a framework for how to think about the various types of family office investors you will come across.

Family offices are not a new phenomenon with many of the longest-tenured offices tracing their roots back to the Robber Baron era. Rockefeller & Co, the original office of the Rockefeller family, was founded in 1882. But the modern era of family offices arguably begins in the late ‘90s / early 2000s. Global investment bank UBS in their 2019 family office survey highlighted that 70% of the families surveyed were formed post-2000, with average assets of $900MM.

How many family offices are there in total? No one really knows. Barbara Roberts of Columbia University notes that there are 20,000 businesses in the US with revenues of $100+ million. Forbes estimates that there are over 600 billionaires in the US. With this calibrating data, estimates of 6,000 – 10,000 offices seem reasonable.

There is a tremendous amount of wealth and growth being allocated by family offices. While a meaningful portion of these funds is invested in traditional equities and fixed income, a large and growing figure is allocated to private equity and, increasingly, the direct ownership of businesses. As you approach offices with opportunities, we have found the following framework to be helpful in understanding the whom you are interacting with – a 2×2 matrix comparing the level of commitment in direct investing and the sophistication of the team involved.

Let us consider each type in a bit more detail –

Type 1 – The Gentleman Farmer

This type of family office investor likes the idea of owning additional businesses – it gives them something to talk about and feel like they are actively involved in managing family wealth. But they likely have not built a robust process to identify deals and bring them to close. Getting a deal across the finish line here is like waiting for lighting to strike.

Ask you screen potential partners, questions about the recency and frequency of deals done will help you determine how committed the office is. Dive into the decision-making process of the family – is there an investment committee? How does a deal get approval? Questions like that will help you determine the family’s level of engagement. Sophistication will likely be evident from the types of questions they ask of you.

Type II – The Enthusiast

Type II family offices are among the most common (along with Type 3). Generally, they are more recently established and are sitting on a lot of cash, looking to put money to work. This may be exacerbated by an office led by a first-gen (G1) wealth creator who is bored and looking for things to do.

At best, enthusiast offices are excited to learn and develop. At worst, these are investors who have become the proverbial patsy at the poker table. They will do a bunch of deals very quickly over an initial 2 – 3-year investment period, and then quickly realize that the returns are disappointing and pull back.

A trusted advisor to the Type II office comes alongside to help educate and improve. Trying to offload your less savory deals to an unwitting buyer is a short-term strategy that will close more doors for you in the long run.

Type III – The Time Waster

This is another highly common type but is oftentimes hard to discern. They have a high level of sophistication and may have even done several good deals at some point. So, they feel like an excellent potential partner. But getting them to move the process along is like pulling teeth.

The most common experience with these types of offices is that you approach them with a deal and think that it has traction. But on follow-up, you get the run-around or most likely receive no communication back at all. The same questions you used for Type I are valuable here, especially diving into when they did their last deal and how many deals, they expect to do over the next 2-3 years.

Type IV – The Deal Mavens

In some ways, these are the easiest offices to work with. The family itself is super serious about what it is doing – and is focused on building a platform that is institutional-grade. In fact, many of these offices will raise outside capital – both as a profit generator and as a validation of the quality of their work.

Working with Type IV offices will be like most other financial sponsors. The differences will lie in the family’s thoughts around time horizon, hurdle rates, leverage, etc. Type IV’s, at their best, are shrewd economic animals who are using the family’s capital and resources to do great deals. Building an office like this is both expensive and difficult, and accordingly, there are much fewer in existence.


Family offices are a real and growing part of the business-owning landscape. Because of how inter-connected offices are, the advisor, that learns who and how to approach with the right deal, is likely to build a meaningful book of business. But distilling prospects down to the right few and approaching with a long-term partnership mentality in mind will be key drivers for success.

About the Author:
David C. Wells, Jr. is the Founder and CEO of Family Capital Strategy, LLC based in Nashville. Family Capital Strategy is a consulting firm focused on helping families and their family offices stay invested together. When facing big transition points, enduring families build the correct strategy to reinforce the families’ unity – their greatest advantage in investing. We help families determine strategic direction, then design and build the path forward.