family office 101<\/a>, and it\u2019s one of the most important things to get right. \u00a0You\u2019re not a rookie, you haven\u2019t even made the team. You need clear and concise reasons for investing and a guiding strategy of how to get it done. \u00a0And you need the rest of the family onboard.<\/p>\n3. Being An Uninformed Shopper<\/h2>\n
Be aware of what you get for your budget. \u00a0Don\u2019t expect full voting rights and a couple of board seats for a $50k investment in a $50M company. \u00a0You get what you pay for, and rookies often expect more than their fair share.<\/p>\n
4. Executing Sloppy Deals<\/h2>\n
This is not your iTunes end-user agreement. \u00a0Don\u2019t blindly click \u2018accept\u2019 and write a check. \u00a0Due diligence is crucial. Know what you\u2019re getting into and document the terms. \u00a0It\u2019s particularly tempting to skip this step for friends and family deals. Protect yourself, your money and your relationships. \u00a0Put it in writing.<\/p>\n
5. Wanting to Know EVERYTHING<\/h2>\n
Wait, did you go too far the other direction? \u00a0While you don\u2019t want to consummate a deal without due diligence, you\u2019ll need to stay focused. \u00a0No deal is perfect. Experienced investors have clear criteria for deals. They apply the criteria, make a decision and move on.<\/p>\n
6. Using Family Lawyers and Accountants<\/h2>\n
Your family’s accountants are great at minimizing your tax burden and your lawyers kick ass at protecting you from any possible downside, but they\u2019re probably not seasoned dealmakers. \u00a0If you want to play in the big leagues, you need counselors with relevant experience and relationships.<\/p>\n
7. Requesting Non-Standard Deal Terms<\/h2>\n
Don\u2019t use deal terms to fix every wart due diligence uncovers. \u00a0This is a key reason many bankers and VCs don\u2019t want to mess with family offices – especially rookies. \u00a0Try to make decisions based on the deal at hand, and if you can\u2019t, maybe it\u2019s not the deal for you.<\/p>\n
8. Taking Too Long<\/h2>\n
Between staggering levels of due diligence and non-standard term requests, rookies often take FOREVER to make a decision. \u00a0VCs make decisions in a matter of days, and private equity deals can come together in a matter of weeks. If you want to be taken seriously, be prepared to work at their speed.<\/p>\n
9. Being Afraid Of Missing Out<\/h2>\n
Worried all the cool kids are hanging out without you? \u00a0Don\u2019t be. Rookies often allow their enthusiasm to cloud their judgment. \u00a0Did you get cold called from a VC with a great deal that requires a snap decision with little information? \u00a0Run. You\u2019ll be the dumb money in the deal. Don’t be exploited by a QVC-style solicitation, especially if you\u2019re new to direct investing. \u00a0Good deals come to those who invest in generating deal flow and leverage their experts.<\/p>\n
10. Skimping On Measurement And Reporting<\/h2>\n
Closing your first deal is a huge accomplishment – but wait, don\u2019t go anywhere! \u00a0Many rookies want to sign, fund and flee, but direct investments need care and feeding. \u00a0The best deals are when the investors bring more than money – strategic insight, relationships or other valuable insight to the table. \u00a0Do your part to help your new investment be successful.<\/p>\n
Ready to avoid these rookie mistakes? \u00a0Check out our series on doing direct investing right<\/a>\u00a0to learn more about setting up a successful family office.<\/p>\n","protected":false},"excerpt":{"rendered":"We\u2019ve seen deals – and even families – fall apart when thanks to a direct investment gone bad. \u00a0While direct investment can be an exciting and lucrative tool to build and maintain your family\u2019s wealth, if you\u2019re just starting out, you\u2019ll want to avoid these rookie mistakes.<\/p>\n","protected":false},"author":2,"featured_media":281,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[13,31,32],"class_list":["post-280","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-family-office","tag-execution","tag-strategy","tag-structure"],"acf":[],"_links":{"self":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=280"}],"version-history":[{"count":2,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/280\/revisions"}],"predecessor-version":[{"id":284,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/280\/revisions\/284"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/media\/281"}],"wp:attachment":[{"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enlightadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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