Family enterprises need to evolve to stay healthy. Philip Benjamin, head of the Benjamin Family Office and co-founder and managing partner at Colzen Capital, uses a farming metaphor to describe this cycle.
“The first generation plants the seed: They have an idea, they start a business. The second generation has to grow that business, grow the crop. By the third or the fourth generation, there’s a natural and healthy harvesting cycle, whether that’s a partial or full liquidity event, that probably should happen,” Benjamin says. “And after you harvest, you need to plant new seeds. You need to grow new businesses and give that third or that fourth generation a new opportunity to redefine, reimagine new green shoots.”
Benjamin lived through this cycle as a member of the fourth generation of a family that sold its real estate business and disbanded its family office as G4 was coming of age. He, his parents and his sister then combined their assets to form a new family office.
“I experienced the harvesting, then redeployment of quite a bit of that capital, and the re-forming of a much smaller family office, which was my immediate family office, after we dissolved the much larger one,” Benjamin says.
As he began to do more direct investing, Benjamin had a realization: “We’re just writing other people checks. I was very aware of what they were making. They are doing a great job and deserve to make what they’re making, but they’re making a lot of money off of our money. I was interested in how I can get on the other side of the economics.”
Benjamin started engaging more deeply with the best people they had invested with.
“I went out and I found some of the best people of my generation in real estate and in private markets, particularly in venture and I started investing with them,” he says. “Then, when I found the people I wanted to work with, I said, ‘Let’s do our own thing. I’ll be your partner. I’ll seed you. Let’s build these up as platforms that we can channel our own capital through, but also other people’s capital.’ I was able to transition into saying, ‘I really am passionate about investing — I want to do this full-time.’”
He is now deep in the “planting new seeds” part of the cycle, having started two businesses in addition to overseeing the family office.
One of the businesses is a real estate development company, Bridgewright Partners.
“I wanted to do the real estate that we did before, and to be able to do that in house,” he says.
The other business is Colzen Equity Financing, a fund that is part of Colzen Capital.
“We are taking a lot of what we learned in real estate and applying it to venture growth, where we do the equivalent of a cash-out refi or hard money lending against shares of late-stage illiquid private companies,” Benjamin says. This helps solve the problem of a lack of liquidity for shareholders of private companies. “This is something that family offices can step in and provide. If you don’t force people to sell you their shares through a secondary sale, but instead you’re willing to finance or lend against them, they’re going to give you an incredible amount of downside protection as a result. We created a really unique model around this.”
Although his family office does invest through these companies, and in some cases gets preferential terms, Benjamin is a principal and managing partner in those businesses in his personal capacity.
“I always recuse myself from a final decision-making judgment on any of those investments. I bring investments to the table, but when I have a conflict of interest because I own the business, my sister ultimately has most of the discretionary power, and my parents and other advisors on our investment committee weigh in as well,” he says.
Benjamin sees these investments as a way for him to continue to create value in new ways.
“I think that one of the risks when you sell your family business is that you can end up as a perpetual LP, or wealth management client, and not really engage in value creation,” he says. “If you aren’t engaging in value creation, managers are — through fees and carry — extracting a lot of value from your capital. And so, one of the best things that family offices can do, in my opinion, is think about what you’re good at, or what you’re interested in, and then find a lane and bet on it, and grow a real business in it.”
Benjamin sees his current work as part of his ancestors’ legacy: “I’m growing businesses that have value above and beyond the capital that I put into it. That’s effectively what my great-grandfather did, which was to buy real estate and build a real estate development company.”
He has drawn on his previous career as a licensed therapist and researcher in psychology — as well as his understanding of the family office world — in forming these business partnerships.
“I understand my limitations — I’m not an expert in taking a real estate development project through entitlements and building it,” Benjamin says. “But I’m really good with people, really good with raising capital. I can partner with a real estate developer.”
He approached his private alt strategy the same way.
“I’m really good at working with founders and executives, really good at working with capital. I understand the people,” he says. “I needed somebody who can underwrite a late-stage unicorn and find where the bombs and the cracks are — the area experts that have spent 15 or 20 years doing this stuff.”
Benjamin says he thinks family offices will play an important role in shaping the future of private alternative investments.
And he has learned the importance of picking a lane and staying in it: “Don’t try to do everything. That has been my entire perspective: What am I good at? I’m going to be good at one or two things. Everything else, I give it to somebody else. And I focus all of my attention and energy on the couple things that I want to be amazing at.”