top of page

The Paradox of Control: the FO's Struggle with Direct Venture Capital—And How They Can Win

  • pvanovermeir
  • Nov 16
  • 2 min read

ree


Family Offices are increasingly pushing into direct Venture Capital as they seek to reduce fees, gain transparency, and exert more control. With nearly 45% of FO portfolios already in alternatives and 63% engaging in direct deals, the momentum is undeniable.


But control comes at a cost.

Many Family Offices underestimate how intensely institutional VC really is. The challenges are predictable—and avoidable:


🔹 The Power Law Problem

VC returns are non-linear. A handful of startups generate the majority of total value. Concentrated FO portfolios—driven by large check sizes and the desire for control—mathematically miss the outliers that drive VC success.

🔹 The Competency Risk Gap

Avoiding fund fees sounds attractive… until you realize you need to replicate the fund’s internal machinery. Without specialized talent, proprietary deal flow, and rigorous diligence, the “savings” evaporate quickly.

🔹 Governance and Speed Misalignment

FO decision-making is highly personalized and often multi-generational. VC demands rapid, data-driven execution. Slow processes and inconsistent governance become structural disadvantages.

🔹 Operational Fragility

Manual processes, spreadsheet-driven tracking, and weak reporting inhibit the visibility and discipline needed for illiquid, long-duration assets.


The irony?

The pursuit of more control often results in less performance.


But there is a path forward.

Winning in direct VC requires embracing institutional rigor:

✔ Adopt broad diversification strategies (often through funds and co-investments) to capture Power Law outliers.


 ✔ Build or borrow true expertise—through hybrid teams, experienced partners, and structured co-invest clubs.

 ✔ Professionalize governance with formal Investment Committees and institutional-grade processes.

 ✔ Invest in real infrastructure—technology, reporting, workflow systems—to reduce operational risk.


Family Offices have a real advantage: patient capital.

But patience only pays off when paired with discipline, diversification, and institutional execution.


The paradox of control is resolved when FOs recognize that professionalization, not personalization, is the path to sustainable long-term VC returns.




 
 
 
bottom of page