Having an Impact, Leaving a Legacy

Back in college I read an article about why wealth stays in families longer (multiple generations) in Europe than in the U.S. (for the answer, ya gotta’ read on). It started what has been a career-long effort to understand the psychology of wealth.

Luckily in 1990 I was able to join a boutique money management firm that had recently been purchased by a European bank — the Bank in Liechtenstein. And to top it off, the firm was located at 3000 Sand Hill Road in Menlo Park.

Talk about combining old money and new!

After the death of my predecessor I purchased the firm back from the bank and decided to do what was typically difficult to accomplish in one organization — deliver institutional quality money management and boutique service.

We delivered first quadrant results for 15 of the 20 yrs I ran the company, while also consulting on philanthropic activities for our largest families.

We became a multi-family office.

And for 20 years I essentially had a laboratory to study the psychology of wealth.

Now at AngelSpan, and our recently launched ‘Venture-as-a-Service’ platform called The Legacy Funds, our goal is to increase the velocity of early-stage investing, particularly by family offices that want to impact the human condition, both locally and globally, by removing the gable in how we fund innovation.

What Motivates the Wealthy

In the new roll I am frequently asked — often after I first explain what a family office actually is — ‘What do family offices care about? What do they invest in?’

The simple answer is they care about their legacy.

Many people understand the definition of a legacy as a description of the membership of a family (son or daughter) to an organization their parents/grandparents belonged to.

What I am referring to is a definition a bit more ‘old school.’

Wiki: Legacy {leguh-see}; anything handed down from the past, as from an ancestor or predecessor.

This is what family offices care about. Period.

Financial Legacy

Advisors to wealthy families, whether they be attorneys, accountants, or financial advisors, tend to understand this. Proper estate planning and financial management can work wonders to secure the family’s estate from unnecessary taxes, provide thoughtful inter-generational transfer strategies, pay for grandchildren’s education (one of my personal favorites), plan any business succession strategies, and even help avoid intra-family disputes.

But once defined and structured, the family simply monitors the deployment and maintenance of the financial assets and estate plan.

Necessary, but not very interesting for the family members.

Qualitative Legacy

Once the financial legacy is secured (and hopefully well communicated between the generations), the family will begin exploring their qualitative legacy — the values they want to reinforce and leave behind for subsequent generations.

This is where the fun begins.

Answer to question above:

Why does wealth typically stay in European families longer than the U.S. — First answer is structural; the U.S. estate planning laws makes it progressively more difficult/complicated/expensive to transfer wealth to subsequent generations. The second answer is philosophical; European families are more accustomed to ‘living off the income’ of the family wealth than the U.S. As each subsequent generation gets access to the corpus of the wealth, it is often times whittled away through ‘bad decisions’.


Philanthropy is often the place families turn to to begin defining what they care about and how they want to affect the lives of others. The instruments are varied, from ‘planned giving’ (specified beneficiaries as part of the estate plan), charitable remainder trusts, family foundations, Community Foundations, or simply direct and consistent donations.

The motivation to provide resources to help others — with no expectation of return — is a powerful motivator for those with such a luxury. Abraham Maslow understood this and captured it in Maslow’s Hierarchy of Needs.

In fact, charitable giving by individuals for 2017 (the last year for totals at the time of this post) was over $380 billion via direct gifts ($286B), bequests from estates ($35B), and indirectly through Foundations ($67B).

These levels dwarf how much is invested in venture capital or angel investing.

A powerful motivator indeed!

Impact Investing

There is a growing interest among high net worth families to look beyond traditional philanthropy for the vehicles to help define and further their qualitative legacies.

One such vehicle is Impact Investing.

Simply stated, impact investing refers to investments “made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.” (Wiki; Impact Investing)

This is a similar agenda as pure philanthropy, but with the potential for a financial return.

And with the growing awareness of the harm venture capital (rather the harm the concentration of venture capital in NYC, Boston & Silicon Valley) is having on the majority of the country, the wealthiest families in the country are examining how to focus their Impact investing in more geographically — and demographically — diverse regions & candidates.

This is called Place Based Impact Investing.

Public vs. Private Markets

With the compressed returns now available from traditional public securities, family offices and other institutional investors are looking beyond the public markets for a reasonable, risk-adjusted, economic return.

In fact, much of the funding in later stage ‘unicorns’ is driven by institutional investors moving money out of the public markets and into later stage private companies with the hope of a profitable IPO in a relatively short period of time.

The jury is still out as to whether that will prove to be a profitable trade.

Family offices are also increasingly looking for direct startup/private company investing to satisfy both their quantitative (financial) returns, in addition to their qualitative legacies.

If Ray Dalio, Blackrock, Morgan Stanley and Goldman Sachs are right, that returns from equities over the next decade will be roughly 4% per year with the ‘asymmetric risk on the downside,’ it is not difficult to see why so many investors are looking for more compelling risk adjusted returns in the private markets.

This bodes well for startups, Impact or not.

Leaving a Legacy — The Legacy Funds

In my career I have said many times that managing money in the public markets is like backing into the future by analyzing the past, while investing in startups is like turning around and profiting from, and having an impact on, the future.

In other words, compressed public market returns with high risk versus investing in your legacy… and profiting from it.

Seems like a no brainer to me.

What will your legacy be?


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