Founders know how businesses work. Building a portfolio of them requires a different skill: a process that can be repeated when instinct is not enough.

A natural pull

Entrepreneurs who have sold a company rarely want to become passive investors. They want to back founders, buy businesses and sit alongside private-equity firms in deals they can understand. The data confirms the trend. PwC's Global Family Office Deals Study 2025 reports that direct investments in companies made up 70% of family-office deals in 2024, compared with 56% for real estate and funds in 2015. EY describes a shift away from traditional fund commitments towards direct investments and co-investments, accompanied by more institutional-grade processes and controls. In Central and Eastern Europe, CMS links the growth of family offices to liquidity events from the sale of family businesses and notes increasing cooperation between family offices and private-equity houses, including co-investment alongside international investors.

The pull is understandable. Commercial judgement earned over decades is a real advantage. But a single successful company is not a portfolio, and the habits that built it are not the same as the habits that preserve a family's capital across many investments.

Where instinct helps and where it misleads

Entrepreneurial experience is most valuable in assessing management and consumer base and sensing when a business model will or will not scale. It is least reliable in three places: pricing a deal in a sector one knows less well, saying no to an opportunity introduced by a friend, and recognising when one's own pattern-recognition is overfitted to the business one happened to build.

A repeatable process exists to protect the investor from those blind spots.

The components of a repeatable process

  • Sourcing. Decide in advance which sectors, stages, geographies and ticket sizes the family will consider, and which it will not. Most direct-investment mistakes begin as deals that fell outside the plan but arrived with a persuasive introduction.
  • Independent due diligence. Commercial, financial, legal and tax diligence carried out by people who are not invested in the deal happening. The founder's own reading of the business is one input, not the conclusion.
  • Valuation. A written view of what the business is worth, on what assumptions, and what return the family requires for the risk taken. If the price demanded does not meet it, the process says no.
  • Governance rights. Board representation, information rights, consent rights over major decisions, protections on dilution and transfer. In a co-investment alongside a private-equity firm, understand precisely what rights the family has and which belong to the lead investor.
  • Conflicts of interest. Who introduced the deal, who is being paid, and whether anyone advising the family is also advising the company or the seller. Record it.
  • Concentration. Set limits on the share of family capital in any single company, sector or sponsor relationship. Direct investments are large and lumpy; without limits, three successes can leave a family dangerously exposed to a fourth.
  • Monitoring. Agree what information the company will report, how often, and who in the family office will read it and act on it. A direct holding that is not monitored is not an investment; it is a hope.
  • Exit planning. Know before investing how and when the family expects to realise value – a sale, a recapitalisation, a listing, a sale to the co-investor – and what happens if that route closes.

Discipline as a service to instinct

None of this replaces the entrepreneur's judgement. It frames it, so that good judgement is applied consistently and the family's capital is not hostage to the quality of a single decision made on a single afternoon.

Working with Otoma Group

We support clients in structuring and managing their direct holdings, working closely with a network of experienced professionals we trust. We invest our own capital alongside clients where it makes sense, and we remain involved from first diligence to final exit. If you are considering a programme of direct investments after a sale, we would welcome a conversation about the process that should sit behind it.