Podcast Summary: The David Weisburd Podcast

Episode: E104: How to Start a Single Family Office w/ Justinas Milašauskas
Release Date: October 17, 2024
Host: David Weisburd
Guest: Justinas Milašauskas, Investment Manager at Will Grow

1. Introduction to Will Grow

In this episode, David Weisburd hosts Justinas Milašauskas, the Investment Manager at Will Grow, a first-generation single family office based in Vilnius, Lithuania. Will Grow has established itself as a prominent player in the European private markets, leveraging its roots from the successful logistics company, Girteka, and the real estate giant, Sirin.

Notable Quote:

"Will Grow is a first generation single family office based in the Baltics in Vilnius, Lithuania. It started eight years ago on the back of a successful logistics business called Gerteka."
— Andrius [01:04]

2. Investment Philosophy and Strategies

Will Grow adopts a robust investment approach, heavily skewed towards private markets, allocating approximately 70% of its assets to this sector. This strategy is facilitated by their operational businesses, which provide the flexibility to engage in more illiquid investments aggressively.

Notable Quotes:

"Having operating businesses allows us to be more aggressive on illiquids."
— Andrius [01:45]

"We are actively investing the [private markets]."
— Andrius [00:00]

3. Portfolio Construction and Asset Allocation

The family office maintains a diversified portfolio across various asset classes, employing a metaphor from European football to illustrate the roles of different investments:

• Venture Capital: Analogous to strikers, aiming for high returns and taking measured risks.
• Buyouts: Comparable to midfielders, providing stability and strong performance.
• Private Credit and Real Assets: Similar to defenders, ensuring steady income generation.

Notable Quote:

"Every asset class has its certain role in our portfolio and probably one of the better analogies could be with European football."
— Andrius [02:30]

4. Building the Venture Capital Portfolio

Will Grow employs a three-year vintage-based investment cadence, aiming to build a diversified portfolio of 15 to 17 managers per cycle. Approximately 80% of their focus is on small pre-seed and seed managers, emphasizing a risk-based ticket sizing strategy. This approach ensures diversification and strong relationships within the fragmented venture ecosystem.

Notable Quotes:

"Our ticket sizing is risk based. So for highest risk seed, pre seed we write a bit smaller checks."
— Andrius [04:15]

"Most of manager relationships come from pre seed and seed space."
— Andrius [04:15]

5. Navigating Geographic Challenges

Operating from Lithuania, Will Grow acknowledges the challenges of being outside major financial hubs. Instead of relocating, they leverage a strategy that involves partnering with networks in established centers like London and the US. This approach allows them to collaborate on due diligence, data, and systems, effectively bridging geographic gaps.

Notable Quote:

"We decided not to build a team in London or US and fund the funds across both venture buyouts and other asset classes help us a lot."
— Andrius [04:26]

6. Sourcing and Evaluating Managers

Will Grow sources its funds through a balanced mix of fund of funds and other networks, each contributing approximately 50% to their pipeline. They prioritize managers with strong cap tables and institutional backing, which serve as significant signals for underwriting decisions.

Notable Quotes:

"I would say half comes from fund of funds, another half comes from other networks."
— Andrius [05:02]

"The strength of the cap table of a fund manager acts as a strong signal."
— Andrius [05:25]

7. Investing in Spin-Out Managers

Will Grow demonstrates a keen interest in spin-out managers—those who have honed their skills at larger firms and are now venturing out independently. They value the entrepreneurial DNA and the potential for these managers to outperform their predecessors.

Notable Quotes:

"The spin outs typically have learned the craft of venture at a bigger firm."
— Andrius [07:09]

"They're also essentially making a bet on themselves... they have a lot of skin in the game."
— Andrius [07:25]

8. Risk Management and Decision-Making

While recognizing the potential of spin-outs, Will Grow remains cautious about associated risks such as GP market fit, fundraising challenges, and scalability of assets under management (AUM). They emphasize thorough due diligence to mitigate these risks.

Notable Quotes:

"The GP market fit... it's important to validate the track record."
— Andrius [07:36]

"We have to pro-actively discuss and understand how, you know, Fund three, Fund four would look like for the emerging Manager."
— Andrius [07:36]

9. Lessons from Public Markets

Drawing from his extensive experience in public markets, Andrius highlights the importance of conviction and selectivity in investment decisions. This philosophy underpins Will Grow’s approach to committing quickly to high-quality deals without succumbing to the pressure of deploying capital hastily.

Notable Quotes:

"Public markets taught me to develop conviction quickly, act fast."
— Andrius [12:17]

"You don't need to chase every opportunity. So that's what we try to focus, be very selective and build conviction quickly."
— Andrius [12:17]

10. Unique Position as a Single Family Office

Will Grow distinguishes itself through its independence from major financial centers and its dual focus on direct investments and fund commitments. Their entrepreneurial DNA and flexibility to act decisively provide a competitive edge in building and maintaining strong relationships with top managers globally.

Notable Quotes:

"We are emerging LP based outside of a typical financial center."
— Andrius [02:01]

"We are happy to be decisive, quick and commit to the first closing as I mentioned."
— Andrius [12:55]

11. Geographic Strategy and Operational Footprint

To overcome geographical limitations, Will Grow allocates significant time to traveling to key financial hubs like New York and San Francisco. This face-to-face interaction is crucial for maintaining and expanding their investment pipeline.

Notable Quotes:

"Given our base far away from the financial centers, we have to travel a lot... six weeks per year in the US."
— Andrius [15:34]

12. Future Outlook and Sustainability

Will Grow is committed to sustaining its venture program without relying on external funding. They project a DPI (Distributions to Paid-In) of 1x eight years out and have structured their investment activities to operate independently from their operational businesses.

Notable Quotes:

"On venture side, DPI should be 1x7 eight years out, we believe maybe even longer."
— Andrius [10:40]

"We are running independently."
— Andrius [10:40]

13. Final Insights and Takeaways

In closing, Andrius emphasizes Will Grow’s patient and quality-focused investment philosophy, particularly in sectors like cyber deep tech, life sciences, and tech bio. Their generalist approach allows them to remain adaptable and receptive to top-tier managers across diverse domains.

Notable Quotes:

"We are very much focused on top quality GPS and patiently investing in venture lower mid market buyouts and other strategies."
— Andrius [14:55]

"We spend a lot of time on cyber deep tech, life sciences, tech bio."
— Andrius [14:55]

Conclusion

This episode offers a comprehensive look into the operations and investment philosophy of Will Grow, shedding light on the intricacies of running a successful single family office in today’s fragmented and competitive financial landscape. Justinas Milašauskas provides invaluable insights into portfolio construction, risk management, and the unique advantages of being an emerging LP outside traditional financial centers.

End of Summary