Need CFO – “No Free Lunch!”

A family office based out of Nassau County had established a successful investment operation which successfully invested in real estate and other ventures. The office had been able to manage their finances and confidently make financial investment decisions for years, but called on Imperial Advisory to help guide them through an unprecedented situation where they felt unequipped and unprepared to make a decision independently. They were considering partnering with a VC fund to launch an industry-specific coworking space. Details of the proposed joint venture included free access to the coworking space for the VC fund in exchange for them pledging to persuade portfolio companies to become tenants. 

To guide the decision-making process, we led an exhaustive analysis evaluating potential startup costs, as well as the market rate for similar coworking spaces. Once all of this information was collected, we used it to run a cost-benefit-analysis on the proposed joint venture. These analyses were presented to the family office. With a robust understanding of the proposal, the family office was empowered and confident throughout negotiations, ultimately coming to the conclusion that the VC was bringing relatively little to the partnership. By giving the VC free access to the space, the family office would be forced to charge other coworking space members more than the market rate to offset startup costs. For this reason, the family office decided not to pursue this partnership. Several iterations of the partnership were evaluated, but the family office was confident that none presented a strong enough investment opportunity, choosing instead to explore other opportunities with the VC. 

With more information and a better understanding of the venture’s potential financial impact on the business, the family office felt confident in making the decision to pass on this venture and instead explore other opportunities with the VC.