UK family office interest in new VC funds has fallen due to a market-wide liquidity crunch. If VCs want to access this capital now, they must bypass blind-pool funds and offer direct co-investment opportunities (club deals), while focusing relentlessly on returning cash (DPI) from existing funds to rebuild capacity.
Why have UK family offices stopped investing in new VC funds?
UK family offices, a traditional source of patient capital, have sharply pulled back from the venture asset class.
- The data: Interest in making new venture capital investments has been cut in half.
- The cause (overallocation): Family offices committed heavily to VC in previous years and have not seen sufficient capital returned. They are now heavily allocated to the asset class, leaving them with no capacity to write new cheques until they receive distributions.
- Their new focus: As a result, they have pivoted to what they perceive as more stable, liquid investments. Real estate became their top portfolio allocation in recent years.
How can VCs access family office capital in this environment?
VCs must adapt their offering to align with the family offices’ desire for more control and transparency. The key is to shift from a fund-centric to a deal-centric approach.
- Offer co-investments: Family offices are still actively doing deals, but they prefer club deals where they can invest directly into a company alongside a lead VC. Offer them co-investment rights in your best portfolio companies - it is the most effective way to unlock their capital.
- Focus on generating DPI: For your existing family office LPs, the single most important action is to return capital. Generating distributions is the only way to solve their overallocation problem and create capacity for them to invest in your next fund.
- Build long-term relationships: The goal is not a quick transaction. Use this period to provide value, share insights, and build trust so that when their liquidity returns, you are their first call.
What is the best way to approach and engage a UK family office?
Family offices are private and relationship-driven. Cold outreach can work in some cases, but try to get an introduction first.
- Use connectors for warm introductions: The best approach is through a trusted intermediary. This includes lawyers, wealth managers, and accountants who already serve the family. Successful, exited entrepreneurs are especially powerful connectors, as they have credibility and a shared experience.
- Be specific and targeted: Do not ask a connector, “Who should I speak to?” Instead, do your research and ask for an introduction to a specific family office, explaining exactly why your fund’s strategy is a relevant fit for their known interests.
- Provide value before asking: Share proprietary deal flow (for co-investment), offer market insights, and invite them to exclusive events. Build a relationship before you make an ask.