E413 | Miki Yokoyama, Aurum Impact: How family offices invest in venture and impact

0:00I want to ask you just to give some best practices advice for VCs that look to raise from family offices. What would be my advice? So I think the first thing definitely is know your LP. So get to know your LP and know what drives the LP to invest in a VC fund. I would also advise get to know them beyond fundraising better before you start fundraising. So work on something together, whether it's a publication, a project, an event, a deal, share deals, if they're also doing direct investments, because that's the best way of getting to know someone to work on a deal. So then what we... Before you go to the third, a good point here.

0:39Am I right in saying that, because some GPs might think, well, how do I get a family office to want to do that? Am I right in saying that if you can't cross that boundary, the likelihood that you can get an investment is not very high either? Probably I can't speak for all different for every family, but I think it's definitely of an advantage if you can get to a family member or someone who works for the family in a setting that doesn't involve fundraising directly. I think if you start off with your pitch right away without any context, it'll be very hard unless you have some stellar, very unique...

1:20Thank you. And that brings me to my third point. We looked at 160 funds in the past two years and we found it very hard oftentimes to find the USP. There are a lot of funds that seem quite similar, whether it's investment focus areas, geography, age, why they think they can win, then they say they have some poor investments here and there. Yeah, but it oftentimes felt very similar. So I think what is good is to have a really good USP. What makes you unique, whether it's your team or your connection to your PNMT, your proprietary accelerator program or anything that you can offer, I think is important.

2:06And then last, I think it takes a very long time to prepare a fund or fundraising. I think I would really take the time to build up your team, your reputation, brand, track record. It takes time and money to do that. But I think in the end, then you'll be probably more successful with fundraising if you've thought about all these things for a little bit of a longer time. Because sometimes I see teams and think, why do they think in this fundraising environment that they can raise a fund? It's really tough. And there's so many funds out there. It's incredible. So maybe these four points. And for us, of course, a very good and solid impact and ESG framework is important.

2:46Also, we try to look closely at diversity as well, because we do have an issue in the venture scene when it comes to diversity as well. So yeah, these are the things. Here's a few words from our beloved sponsor. Discover where operational expertise meets innovation. With end-to-end coverage across fund admin, tax, accounting, compliance, ESG and more, we take care of the complexities so you can focus on what matters most. Whether it's supporting visionaries or maximizing returns for your LPs, our tech-driven and comprehensive solutions empower you to achieve your goals with confidence. Partner with Ace Alternatives to streamline your operations and elevate your fund's success.

3:27This was their final show. Tear down this wall. It's more than just an ally. This is a union of values. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Miki, welcome to the European Easy Podcast. Hello. Nice to be here. I am so excited to bring you on because one of the very few times I have gotten an inbound to come on the podcast from a family office that wanted to talk about how they invest in the mission they're on in the space of venture and impact. So I'm excited to be having this conversation with you.

4:15Yes, me too. Thank you for having me. Miki, I told you just before we started that I want to start by just asking you a bit about yourself and the family behind Aurum Impact. And of course, also the family office in totality, so to say. So maybe you'll start there. Tell us a bit about Aurum Impact and the family, the Goldbeck family office. Yes, happy to. So Aurum Impact is part of the family office of the Goldbeck family. and the Goldbecks are or they own a construction business started by their father, Ottwin Goldbeck and two brothers or two sons are now the co-CEOs of the construction business and the third brother has a solar business which they split off from their construction business a few years ago.

5:04So it's basically three brothers now and the parents and they have a family office called Aurum, Latin or also the word for gold. And Aurum has different entities investing in different kinds of asset classes and Aurum Impact is the one where we invest in startups and funds that aim to have a positive financial return, but also a positive environmental or social return. Let me start this conversation and then the question, why are you motivated to come on a podcast to talk as a family office? Because most do not want to. that's a good question so my background is in mainly sustainability let's say sustainability and impact i worked in um consulting for a few years and then moved on to unterdemertu which is now europe's largest entrepreneurship center and at unterdemertu i learned a lot about venture capital and startups and how scaling works and all these things and also realized that families in Germany actually hold a lot of wealth as well.

6:18And the families or family offices are increasingly interested in investing more in startups and becoming more active in the venture world, but do this very, very privately. And due to this, it's on one side difficult for more families to get involved in the venture asset class because it's seemingly, I mean, it is very risky because the risk is high because it's also something that is not very known or more foreign to them. And on the other side, it's very difficult for startups and funds to get in touch with families or family offices that invest in this asset class. When we started Aurum Impact, it was with the mission to invest in startups and funds, but also to drive change in the system in many different ways where we see challenges in the system and in all these different layers, as we call it, in the ecosystem from talents, startups, VCs, LPs, and the broader ecosystem.

7:23So we, at Aurum Impact, want to inspire more families and family offices to get active in the venture space and especially in impact investing. And that's why we want to get the word out. And if we should just put some numbers so that at least describe Aurum a bit from the perspective of where we often do, which is what investments have you done? Since launching in February, 2023, you've invested directly in six startups, Pebble, the land, seven now, things move quick. Pebble, the land banking group, Vault Fang, Undo, Clean Hub and Cyclize. And then you've invested in eight funds, some of them good friends of mine, Planet A, Systemic, Revent, Breakthrough Energy Ventures, Counteract, and more.

8:08Yes. And we're also in the process of signing five more right now. Oh, exciting. All impact as well? All impact. Yes. So that means, so since February 2023, that means you do five, six funds per year. Is that the aim? And yes, so every year we want to invest in four to five impact funds and four to five new companies as well. Some VCs understand family offices perfectly and how they're structured and what's important to consider. I'm sure it's a question you get by many. Some will ask it bluntly. Some will just try and get it out of you. I'll ask it completely bluntly here. how does or how has the Goldberg family office come to the decision that they want to do impact and how have you then structured so to say the family office to allow you to do so?

9:01Meaning do you invest out of one big balance sheet or do you have money set aside? How does this work? The family office has invested in venture so funds and also direct investments for a few years now. mainly driven by Hendrik Goldbeck, so one of the brothers. He's a person that is very open to new things, let's say open to explore things, but also very familiar with the venture scene and has, I think, driven this largely, because I wasn't there yet, but from what I've heard, I think he was the main driver in investing more in funds and startups. I think the first impact funds came about, So around, I think, 2019, 2020, it was when Planet A started to form the World Fund, ANU, and the others in Germany.

9:56Hendrik was one of the first who also said, I want to invest in these funds as well and make it also a core pillar of my investment strategy and venture. He looked for someone, and that was the coincidence where I came in, who could build up this unit for him. and he and the family office, they established our impact as its own legal entity and have decided then that they only want to invest in impact topics or construction-related topics, construction makes a total sense from a strategic standpoint. And then the impact angle was also out of their sense of responsibility that they were enormously lucky also in the past 20, let's say 50 years with the business that they've built up and with everything that they've accomplished and how they succeeded with the company and wanted to give back some of their wealth also to things that they thought mattered to society.

10:57Which is like, just to highlight a point here, a lot of the family office capital is very often, I call it patriotic capital or passion capital. It is, of course, to create returns, but it's also very often earmarked to either a specific deal or a specific vertical. Let me ask you, maybe on that part, do you have any specific remit in terms of only Europe or primarily Germany or anything along those lines? We do have a strategy, but as with probably every family, we are also quite flexible, I would say. or I want us to be flexible. We've set our geographic target geographies, let's put it that way, as mainly Europe, of course, because we know the market best here.

11:51And we can also invest in the U.S. or any other market if there is a fit and if it makes sense somehow. The risk, of course, always increases with distance or if you don't know the people, the culture, the language there. so having said that I think if there is a good connection if it makes sense if it's a topic that makes sense then we can we're open to invest and we can invest there as four topics we have developed four topics for our direct investments which is energy, circularity and materials ecosystems and fourth is social equity and stability so we try to invest along these four themes for direct investments and for funds topic for topic wise it's completely agnostic so we try to diversify along topics geographies fund sizes stages and all these things but are quite flexible there agnostic within still the overarching goal of impact that is true so every fund and every company too they have to be able to show us that their mission is really driven by improving a specific social or environmental topic, let's say.

13:06So whether it's around water savings, CO2 emission reduction, reduction of plastic waste, it can be different environmental or social KPIs. It's funny, Miki, because we are doing the European VC Awards every year. And this year we've added in the Impact Leader Award as well. Together with Batter Society, CAVL, They're helping us judge it. And Google are sponsoring it. So thank you, Google Cloud, for that. But there we had this discussion. So when we focus on impact with this award, does it have to be an impact fund? Does it have to be an Article 9 fund or 8 fund? Does it have to be a climate fund?

13:50What we ended up deciding was that we wanted it to be open to anyone, so to say, so generalists across all spaces. with the first core criteria, stellar returns. And then after that, the impact that they have made on different, and there it's both in terms of their internal practices to make sure that it's actually a good steward of capital and of the impact agenda. And then the impact they have made in the market, so to say, in terms of it could be carbon lowering emissions and so on. I'd love to hear you, how you think along those lines, Because what we're saying is, as an example, a fund like Atomico are doing a lot on the impact agenda, but they're not an impact fund necessarily as such.

14:36So I'd love to hear how you think about that. I think the word impact is quite unfortunate nowadays because impact is everything that you do or everything that anyone does has an impact somehow, right? Right. We mean what is meant with impact investing is always that you look for financial return alongside an environmental and social return. And I think maybe we need a new term or something because, of course, other VCs that invest in AI or robotics or aerospace, they say we have a big impact. I say, of course, everyone has an impact. That's not what we're talking about. Not everything has to be impact investing in that sense for social environmental topics.

15:16we need other topics too of course it's tough for me that everyone is trying to use the word impact now and i think i'm also thinking with the team we need to move away from that term because everyone says now i have impact i want to have impact too but we need something different it's two different things essentially yeah do you know the team at better society capital yes yes very good friends okay i want to go back to another question uh just trying to map out how you come to your strategy and so on. So you've done seven startup investments almost. You've done eight funds with another one coming.

15:55I want to ask, sorry, another five coming. I want to ask you, how did you as a family office come to this split between direct and fund investments? And does the volume number here, the number of investments also match the size of the checks? Meaning is it also in dollar amounts more or less 50-50? How did we get to the split? I think that was different talks with the family officer or family office and the family itself on their preferences and also my competencies and skills that I brought to the table. I didn't invest in funds before, but it was something that they definitely wanted to do and wanted to continue.

16:39So we decided to do just dramatically half-half. And naturally, tickets in funds have been and will be a little bit bigger and higher than in startups because we also invest quite early. And for funds, fund sizes are just bigger. So it makes a little bit more sense to put bigger tickets in. For example, the Breakthrough Energy Fund is$1 billion. And if you come with$500K, it's a little bit difficult to get an investment there but for startups we can start as early as with 500k but generally it's more one to two million and for funds it can be from maybe one million to ten million probably the medium is between three and five i'd say yeah and how do you think about the fund sizes and fund generations and maybe here let's let's remember that we have family offices other family offices listening in So maybe reflect a bit on the process of getting to this, the things you considered.

17:40And I have my perspective, but I'd love to hear you first say, this is how we looked at the venture market. And this is how we came up with our decision in terms of, we want to do this many emerging managers. We want to do this many established. We're not comfortable going too far away from Europe, those things. Let's put direct investments aside for now. And let's only look at funds. I think for funds, it's easier to start with funds. If you're quite risk averse but want to get into venture, I think it's easier to start with funds. Of course, you have all these different aspects that you can check and track.

18:17For example, the track record or also is it the first time fund or not? What kind of topics do they invest in a stage and so forth? But what I have tried is to find out what the family thinks and what is important for them, for one. So coming in as an external and trying to set this up. And then also to see where do I think, do we have the most value add as a family office? And where can we also be brave and do something a little bit differently than traditional asset managers or big insurance companies or pension funds? For example, historically, first-time managers have higher returns than second, third, or fourth bond generations.

19:05But of course, it's more risky because you don't ever really know if the team can work together well, if they can show the returns, if they can get the best investment, and so forth. And it's very tough for them to get money. So I try also to always put emerging managers, first-time managers in the mix, where other people categorically exclude them. then for example there are funds that have a really hard time raising for example now it's social topics and it's very tough you can say it's maybe not a good venture class but also it is it is not non-venture right so it's something in between and it's very tough for them to get money but they're very good models that we do need whether it's in the health care space or health tech, biotech, education, these topics where families are needed to step in to fill a gap where no one else is really able to put it in a drawer and say it's this asset class, right?

20:08And same goes for like special targets or special missions, like whether it's diversity or LGBTQ TQ or other topics where funds have a specific angle or USP where it's just tough to raise money from institutionals or established asset managers. So it has to be a mix somehow. At the same time, of course, we need to analyze all the other metrics that everyone's also analyzing with track record, with what the contracts look like and the waterfall, how is distributed in the end, what their USP is, what their investment strategy is, the fund model, and team set up all these things. But that's natural.

20:50It's incredibly interesting to hear, right? And there are so many points also for GPs listening in because some families will be 100 % focused on returns. They will not think at all the considerations you had just now given around which funds have a tough time raising in the market, what is needed from a societal perspective and so on. And then a family can be on the completely opposite spectrum like you are. And that just underlines the importance of a GP listening first rather than talking first, because you're going to be receptive to a completely different pitch than someone else and receptive to a completely different fund.

21:33Yes. Yeah, that is true. I think that's also my number one tip to GPs that when they're raising, know who your LP is, because they're LPs who want the very arrogant founder pitch and focus on returns only. And then there's maybe families or private wealth owners who want a different story. They want to also maybe see deal flow or learn or I don't like can be very different motives. but if you don't know them, you start with your standard story. It's the worst thing I think you can do. Same for every startup, right? A startup also has to know the VC and know what the VC is looking for. And it's not that we're not looking for returns.

22:16I think it's a good mix and it has to be a diversified portfolio, I think, across the different funds that we invest in. One of the motivations or actually the prime motivation for you to want to come on the podcast is you want to motivate other families to do the same and get into this space. So maybe would you lift the veil a bit on how do you talk to other families about this? What are the questions you often get? What are the things you'd wish you were talking more about? Yeah, so in the past years, I have talked to, I would say, a lot of other families and also asked them on how they invest and why they invest the way they do, how the structure is set up, because most wealthy families have external people managing the money, whether it's a private bank or a family office or a multifamily office.

23:08But I mean, a fact is that families in Germany, families also worldwide, hold more and more wealth proportionate to global wealth in total. So there is a big, big mass of capital that we can use for either very good things or things that just focus on return. And when I talk to other families, what I often hear is, of course, it's managed by other people. And then the challenge is if you, as a very motivated next gen, go to your family office and say, hey, I want to invest my money differently. What can you offer me? What options do I have? What can I change in my portfolio that it's more sustainable, that it focuses on other things and just returns?

23:52then most family offices and banks and um yeah or consultants they say i don't know yeah i don't like that's not my job my job is to give you the returns stable returns and what i know is a b c d but it's for 90 it's not impact investing it's been very frustrating actually to also speak to a lot of multi-family offices and um wealth management companies because they say we don't really focus on that because it's not our it's not our business model our business model is to make money to get a proportion of that because if we downsize if we say we invest for no return or for flat return or for like more philanthropic reasons then there's no money in it for us in the traditional business model and i think we need a mindset shift there because there's more demand but then again of course you're often held back because if there's no one there that can advise you properly it's like you have a disease and you go to a doctor and the doctor just say i says i don't know then you like what what do you do right you you don't really know what to do you can go to another doctor another doctor but if everyone's telling you the same thing you just somehow stop looking and i think that would that that's what we have right now currently oftentimes that they don't know where and how to turn to.

25:16And then there's a few very specialized boutique firms, sometimes quite an unfortunate combination coming out of the philanthropic world where they don't really have the expertise in impact investing or really venture impact investing, but rather philanthropic. And then they seem too unprofessional, but more philanthropically capable. And then you have the likes of, let's say, Goldman Sachs, UBS credits, Deutsche Bank, who come from the very other side, and they're starting to just think about, oh, do we need to add it to our portfolio? But when they sell it, it doesn't come across as authentic.

25:52So oftentimes, they come across more, sometimes too arrogant, not understanding what the next generation really wants. And then they stop talking to them, too. So it's a transition right now that is happening. and I hope I can inspire more families to find people that can do this professionally for them and with them in a way that really fulfills them too and also their expectations. Do you know the team Carbon Equity? Yes, yes. I imagine that it's a bit up their alley, right? Because I think they work quite closely with some families. Yeah, and from like the business model, as I understand, is that they invest in funds and that you can start investing through them in a different impact fund.

26:38Definitely a great step and also a great addition to this ecosystem. I think sometimes families need more than just the venture asset class and also a nudge and more help in the whole conversation, more conversation, more like along the whole entire journey that someone is there to help them how to navigate this. It's pretty interesting. You're on a podcast, you're asking for an MFO to be formed for impact, right? Or an advisory business within impact investing. That's quite interesting. And you're saying so because as someone actively deploying in this space, you haven't really seen it out there.

27:21There are a few firms that do that increasingly now, but still too little. because most families do, of course, have their established family office, private bank, established institutions that have worked with them for years. And it's difficult, of course, to change that. Yeah. It's difficult for a whole host of reasons. I'm curious to ask you. So I'm just trying to demystify the family office space a little bit for people here. the dialogue that you have with other families within this? Where does that dialogue often arise? Are there networks that are powerful and good? Or is it just existing connections from family to family?

28:11How does that work? I think it's a little bit of a snowball mechanism that you know two, three people and then are referred to the next two, three. You meet people at events or at gatherings. But we also noticed that in no established family business network, the topic of impact investing across all asset classes is actually a big one, so to say. with a few other next gens we've been doing our own events where we invite next gens and great speakers who tell the round what they're doing or how they have experienced their own journey to impact investing or their responsibility for the company or their wealth and I hope that the established networks also get the or introduce the topic of impact investing more and more into their events as well.

29:09How much of this happens in, so I've written a book together with actually my former mentor on the soft issues in family business succession. And in the Family Business Network in Denmark, a whole subgroup was built around family offices to help the families establish new family offices. Is that also the structure in Germany that you see that it's run typically for a family business ownership group? And then this is where these conversations start? Or are there also good networks for family offices? Because it's two different things. Are you tied together because you own a business? Or are you tied together because you have amassed a large amount of wealth?

29:56And then you have a family office, right? It's two very different things. So my question is, in these networks, and I don't know if you know this, but are the networks in Germany oftentimes built around the family offices or are they built around the family business ownership? Family business ownership. Yeah. And that is interesting, right? Because a lot of GPs think family office. But when there are networks that you want to understand, it's oftentimes the family business ownership networks. Maybe it is half. Also, I know, I think from my network, I feel it is more on family business ownership.

30:34But of course, it's also just the bubble that I am in and it could also be different. No, but I do think you're correct, actually. I'd also love to ask you, now you run the impact venture arm of the family office. how do you interact with the principal and the family and the the arm that then owns the business so to say the construction business and so on asking partly out of curiosity but also to show the breadth of the role that someone like you are in so for our own impact we have regular or i have regular interactions with the family officer and one of the brothers. So we're an investment committee of four, so two brothers, the family officer, and I.

31:24That's for all investments of RM Impact. We also then have regular interactions with the person responsible for venture investments that are more of strategic nature, jointly with the family officer and the family as well. just I think for exchange and interactions of that this person sees what I'm doing and I'm seeing also what the overall Goldbeck universe is investing in and can add micro cents to it if needed and if wanted then of course there are a lot of other assets that the Goldbeck family holds and a lot of other activities that they're engaged in where I'm less involved but naturally I have a lot of my plate with my own team and investments so it's run basically as a pretty independent unit same actually as Indigo so with the Goldberg family also has a real estate investment company called Indigo based in Düsseldorf there are 12 people there also I think they started around 10 15 years ago and in the beginning they were a little bit from what I heard more closely They knitted together with the Goldback company as well.

32:39But naturally, as they grew and did their own investments, their own activities, they're also very independent, own unit. I love this space because everything is so different from one place to another. I know you have a blueprint for impact investing. I'd love to ask you to tell us a bit about that. During the strategy process, we've established something that my team now calls the onion. So basically, we looked at every layer in the impact investing ecosystems. So from talents to startups to MTR portfolios, venture capital firms, LPs and ecosystem. And we looked at the challenges and what we thought should be or could be improved on how to get more capital into the impact investing ecosystem.