Cluster Family Office Blog

The Technology Entrepreneur and the Family Office

Por the technology entrepreneur, everything moves very fast. Unlike the entrepreneur in any conventional, non-technology related business, for whom years or decades are part of the evolution of their business, in the technology company it is the quarters that precipitate events and their success or demise.

The timing of the evolutionA non-tech business generally matures at the same time as its partners’ hair turns grey. Thus, success generallywas the gradual expansion and the simultaneous, or subsequent, creation of wealth for its owners. Over the course of those years—perhaps even decades—business owners can, and indeed should, seek advice (and, where possible, receive training) on how to manage the wealth generated by their business. They have years to do so, although often their commitment to the business and/or a lack of information mean that this essential advice comes too late, and may also be provided in a corrupt or incompetent manner.

In the case of tech start-up founders, the challenge increases significantly, as the rapid pace of events and the breakneck evolution of these businesses mean that the partners’ commitment to the company is often even more essential and all-consuming. Just as with elite athletes, their profession absorbs all their attention and energy. Furthermore, in the case of the tech entrepreneur, this happens at an even faster pace, in just a few semesters, whereas in the case of a professional sporting career, it usually takes between 5 and 10 years.

It is becoming increasingly common to come across tech entrepreneurs who find themselves involved in corporate events (capital increases, full or partial sales, mergers, etc.) that turn them into young millionaires in just 1, 2, 3 or 5 years. Most remain closely involved and devoted to their companies because the business itself needs them or, simply, because they are particularly dedicated entrepreneurs: the tech business they built from scratch is their life. However, despite their youth, we must not forget that they suddenly find themselves with a very substantial amount of capital or assets, either within or outside the company. Fortunately, their high IQ, education and youth work in their favour when it comes to seeking out expert help, in contrast to the classic profile of the non-tech entrepreneur: older and self-made.

Tech entrepreneurs cannot be compared to the old-school traditional entrepreneur who has amassed a fortunenThose who have built their businesses over the years, or those who, faced with the difficulty of ensuring a successful generational handover, decide to sell their company upon reaching retirement age—no. Tech entrepreneurs suddenly find themselves in a situation comparable to what happens to those heirs, lottery winners or, in some cases, professional sportspeople. We are dealing with what we call «sudden fortunes». That is to say, wealth created suddenly (in a short period of time, though not necessarily through the effort involved) and without having had time to pave the way to wealth. And what’s worse, unlike heirs, lottery winners and elite athletes, young founders of tech companies must remain 100% focused on their businesses. Many of them cannot even afford the luxury of radically changing their lifestyle, of «retiring». They remain committed to their passion for technology, whether by continuing in their role as CEO of their company, even with a smaller shareholding, or by launching or investing in new start-ups as business angels.

For this reason, the peace of mind that comes from having the services of a Family Office is, if anything, even more essential for this type of successful tech entrepreneur than it is for other types of sudden wealth, and of course for business owners and other high-net-worth individuals. We see on a daily basis that the dedication and demands of their businesses lead them to relegate the management of their new wealth to a dangerous back burner. At Cluster Family Office, we devote special attention to this very specific client profile, who are so absorbed in their businesses and hectic work schedules that even we, as a Family Office, find it difficult to secure their attention on a regular basis to deal with matters relating to the management of their wealth.

Our experience tells us that this is likely the type of client with the least time and attention to spare for managing their investments. Undoubtedly, this is a new profile that has been emerging strongly in recent times, with a pressing need for assistance in managing the wealth they have built up, enabling them to protect and grow it during the most productive and intense years of their lives.

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