I chatted with someone who used to work at a family office with a real estate background that manages a large investment portfolio across different asset classes. This person shared a few things that stuck with me:

• Opportunities to create value and wealth in real estate won’t look like the past. The return profile will look different. Individuals and families who own real estate will likely keep it and pass it on for a variety of reasons (taxes is a big one). The acquisition prices seen in the last few decades likely won’t be repeated, making it harder for new entrants to create returns like those of people who started thirty or forty years ago.
• Other asset classes, such as public equities, aren’t great for multiplying wealth.
• Venture is the best asset class for value and wealth creation. It’s a great asset class for those looking to multiply wealth, not just preserve it. But it’s one of the hardest asset classes to penetrate if you don’t have a background in it or existing relationships. It’s also hard for family offices to be successful if they don’t have the appropriate risk appetite and portfolio construction strategy (i.e., in relation to check size and stage). Family offices like venture as an asset class but can struggle to have success.

Interesting thoughts. Some of them I’ve heard from people in other family offices I’ve talked with. We’ll see more capital flow toward owning private companies (i.e., private equity), with many family offices and other institutions specifically wanting access to early-stage private companies (i.e., venture capital). Overall, I think this is good for entrepreneurship and founders. I do think we’ll need to see improvements in how that capital (and other resources) are matched to founders. At the early stage (seed and pre-seed), the process is massively inefficient.