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What’s a family office, and why might it be the next big source of funding for M’sian startups?

The Malaysian startup ecosystem is evolving rapidly, and a new player is emerging on the funding scene: the family office. 

While venture capital (VC) has traditionally dominated startup funding, family offices are now stepping into the spotlight, offering an alternative source of capital that could reshape the landscape. 

But what exactly is a family office, and why should Malaysian startup founders pay attention, according to DisruptInvest Summit 2024 speakers?

What is a family office?

A family office is a private wealth management advisory firm that serves ultra-high-net-worth individuals.

Unlike traditional investment firms, family offices tailor their services to manage and grow the wealth of a single family or multiple families.

They invest across a broad range of asset classes, including fixed income, equities, private equity, real estate, and more. Crucially, they offer a more hands-on, patient approach to investing compared to institutional investors.

The role of family offices in Malaysia

Historically, family offices have been more prevalent in regions like Europe and North America. However, Asia, particularly Southeast Asia, is witnessing a surge in the establishment of family offices. 

According to Pioneer Generation and Serene Group of Companies CEO and CIO Rebekah Woo, Singapore has been at the forefront of this trend, with numerous family offices setting up shop to take advantage of its robust financial infrastructure and favourable tax policies. 

Image Credit: Rebekah Woo via LinkedIn

Malaysia, too, is starting to see growth in this area, although it remains relatively nascent.

She said family offices, unlike large institutions, offer a more practical and scalable investment approach. 

“They often invest in funds across different asset classes and sometimes engage in direct deals, seeking co-investment opportunities to diversify their portfolios,” she said during a panel discussion.

Why should M’sian founders care?

Family offices bring a unique value proposition to the table. They offer more than just capital; they provide strategic guidance, long-term investment horizons, and often a deep understanding of specific industries. 

This can be particularly beneficial for startups in Malaysia looking for patient capital that supports sustainable growth rather than quick returns.

Aimz Capital Managing Director Alief Iskandar Mohd Zuhri highlighted the importance of family offices in the startup ecosystem. 

“We realised that to maximise our investments’ transparency and efficiency, consolidating our investments into a family office was crucial. We look for diversification and extra returns through VC partnerships, which are harder to achieve with traditional asset classes alone,” he said.

Image Credit: Alief Iskandar via LinkedIn

Challenges and opportunities

Despite the promising outlook, there are challenges to the growth of family offices in Malaysia. 

One significant hurdle is the lack of a clear regulatory framework, which can deter potential family offices from setting up. 

“Clear policies are needed to encourage more family offices in Malaysia. If regulations are not conducive, families might move their wealth to more favourable jurisdictions like Singapore.”

“However, the Malaysian government is aware of this and is reportedly working on implementing family office policies,” shared Alief.

He also said that the growth potential is immense, especially as more ultra-high-net-worth individuals in Malaysia and the region begin considering family offices for wealth management and succession planning.

The future of family offices in Malaysia

The future of family offices in Malaysia looks promising, with several factors driving growth, said the speakers. Southeast Asia is a vibrant region with strong economic fundamentals, a young and dynamic population, and increasing innovation. 

Rebecca emphasised the importance of a diversified portfolio, especially in a region with varying economic cycles. 

“Investing in Southeast Asia offers tremendous growth opportunities. Despite market fluctuations, the fundamental growth story remains strong,” she said.

Image Credit: AppWorks

Sophie Chiu’s perspective from AppWorks, a VC firm based in Taiwan, also underscored the strategic value family offices bring. 

“Family offices in Taiwan look for strategic collaboration to drive innovation and growth in their existing businesses. This approach can significantly benefit startups looking for more than just financial investment,” she said. 

While family offices are still emerging in Malaysia, they hold significant potential to become a major player in the startup ecosystem. Founders should consider them as a viable alternative to traditional VC funding, offering a blend of financial support and strategic insight that could be crucial for their long-term success.

Featured Image Credit: Vulcan Post

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