From start to exit, family offices need careful planning
Panellists discuss the importance of education when it comes to family offices, both for succession and for leadership
London Business School alumni know the value of education. That’s a given. Finance and accountancy, managerial skills and even natural talents such as entrepreneurial flair and leadership can all be learned or enhanced with well-constructed courses.
While individual business founders and executives will set their own goals and shape their legacies on their paths to success, educating the next generation will continue to motivate many former students long after graduation.
As a panel of first-generation entrepreneurs at the annual London Business School Family Office Conference discovered, a commitment to business education can unite both those who come specifically to pick up tips on establishing a family office and those with no interest in setting up a formal family vehicle at all.
The discussion was chaired by Luisa Alemany, Associate Professor of Management Practice in Strategy and Entrepreneurship. Among her guests were Hussein Kanji of Hoxton Ventures; Anuj Srivastava, a former product-marketing executive at Google, who later co-founded and built the Indian “unicorn” Livspace into Asia’s largest omnichannel home interiors platform; and Chitra Stern, CEO, Owner and Founding Board member of Martinhal Family Hotels & Resorts, the United Lisbon International School, and the Edu Hub of Lisbon.
Business education as a tool
Successful business people, be they venture capitalists such as Hussein, or serial entrepreneurs in their own right like Anuj or Chitra, tend to lead busy lives. Thus, while one might prefer to outsource the management of their personal investments to a professional wealth manager, another might leave it to their spouse – in this case the scion of an already wealthy family, who acts as the CIO of an existing family office. Alternatively, after decades spent establishing a strong and entrepreneurial business partnership with their spouse, another might take the time to return to London Business School to learn about structuring a family office to diversify their investments and create a legacy for the next generation.
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“You can lose your money, but you’ll never lose your education”
“I came back to do these executive education courses, primarily to get on this path, to learn about what is the best practice out there,” said London Business School MBA alumna Chitra, “and how first generations and second generations are addressing this topic of scaling a family business into the next generation, and of creating a family office. It doesn’t happen overnight, as we know. But I’ve had conversations with professors and classmates about how to get to where we want to be in fifteen years’ time.”
However, what the three panellists had in common was a devotion to education, whether for their own families or for others, and to charitable giving.
“You can lose your money, but you’ll never lose your education,” said Chitra, who, together with her husband, Roman, has diversified their Portuguese real estate and hotels business into schools and education.
The business of giving
The Sterns, who met while working at accountancy firm PwC, developed an interest in private equity investing at London Business School. They went on to invest equity in establishing the first international school in Lisbon, which Chitra said was “founded on the pillars of… Entrepreneurship, Technology, the Arts and Sports,” in line with the UN’s sustainable development goal and their own “purpose in life.” In true real-estate investor fashion, they later sold a majority stake in the operating company to Britain’s Dukes Education Group, while holding onto the property company.
They have also made several donations to business education over the years, giving to the London Business School and two Portuguese universities, the Catolica Lisbon School of Business and Economics and the Nova School of Business and Economics. The courses at London Business School have made them think about setting up a foundation for future charitable work in education.
Hussein left a job at Microsoft in the US in 2005 to join venture firm Accel in London, where he continued to work while pursuing an MBA at London Business School. In 2013 he established Hoxton Ventures, becoming an early investor in food delivery company Deliveroo and cybersecurity company Darktrace. He recently raised Hoxton’s third fund at $215 million He said he will give more to charity as his fund returns grow.
"We're reasonably big givers as a family,” said Hussein. “As we get distributions from a fund, we like to give a bunch back. Some of it is for education and some of it for humanitarian causes…
“The first fund was small, but the second one was triple the size, so that should give us a bigger amount (to donate). And the third fund was a little bit bigger. So, my guess is that over the next 20 to 30 years, we'll end up compounding a bunch of our wealth. And my guess is we'll probably end up giving most of it away."
Passing it on to the next generation
Hussein’s first child is only two years old, so it may be a little early for him to think about how to pass on Hoxton Ventures within the family. But he said he spends a lot of his time “thinking about how to sustain the fund… and pass the buck over to the next generation that we’ve hired.”
“Venture funds are not really family businesses…,” he said, explaining the importance within a venture partnership of thinking ahead about the transition to a new generation.
“There’s a whole art and science about how to do generational planning within the firm to basically pass it on to the next generation of leaders. And that usually has to happen 10 to 15 years ahead of when you’re actually doing the transition.”
"The best way to ensure successful succession planning would be to set up structures where the first generation can “fire themselves,” leaving the way open for others to take their place"
The panel advocated planning ahead for succession both at their companies and the leadership of their family offices. A founder should not carry on until they drop. Nor should they automatically assume their children would take over the business, let alone force them to take over. The best way to ensure successful succession planning would be to set up structures where the first generation can “fire themselves,” leaving the way open for others to take their place.
Said Chitra: “An entrepreneur must always be ready to exit… We also want to give our children the confidence to know that a business can be sold and we can always start something else in the future.”
However, for her, as for many other first and second-generation wealth creators, there is a balance to be struck between creating a legacy for her four children and allowing them the freedom to forge their own careers. No child, she said, should be forced to take over as a CEO. She was a great believer in letting them leave Portugal and go out and “get educated, work for other companies for ten years and see what they want to do. “
In the meantime, she and her husband would focus on building up a strong management team. The children would return when they were ready, “Between them, hopefully they’ll be able to be on the board and direct the companies the right way.”
