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A note before we start.
Family offices have always been the quiet backbone of Australian venture capital. Not superannuation funds, not sovereign wealth, not the tier-one endowments — the privately-held, multi-generational capital of families who built businesses, sold them, and now steward the proceeds. They are patient when they need to be, decisive when they want to be, and — in our experience — the most rigorous LPs we speak to.
This letter is for them. It is also for the advisors, investment committees and next-generation principals who are being asked, often for the first time, to size a venture allocation in an asset class most generalist finance training pretends not to exist. We wrote it because the questions we get on intro calls are nearly always the same, and they deserve better answers than a deck.
A few caveats up front. We are a pre-seed fund. We invest at the earliest stage, in Australian and New Zealand founders, with cheques between A$250k and A$1m. What follows reflects that vantage — it will be most useful to families considering an allocation to emerging-manager venture, and less useful to those thinking about crossover or growth equity. Treat it accordingly.
01
Why venture, for a family office.
There is an honest version of the answer and a dishonest one. The dishonest version — the one every fund deck opens with — is the power-law return distribution and the Sequoia-funded-WhatsApp case study. We'll skip it.
The honest version is this: venture is the only institutional asset class where a family office can compound relationships alongside capital. Public equities don't introduce you to anyone. Private credit doesn't teach your next generation how a business is built. A well-chosen venture programme — five managers, fifteen years, consistent cheque — does both. The financial return is the secondary product. The primary one is exposure to founders, operators, technologies and networks that would otherwise take two generations to encounter.
1This is not a universally popular view. Some families treat venture purely as an alpha-generating sleeve and do not want the relationship component. That is a legitimate stance — but it usually ends in a single allocation to a tier-one US fund and a quiet disappointment with the J-curve. Know which game you are playing.
Every family office we respect has internalised this and built their programme around it. They show up to AGMs. They take co-invests selectively, with help. They ask the manager for founder introductions when it's useful and — more importantly — stay out of the way when it's not.
"The best family office LPs we've worked with don't treat venture as an asset class. They treat it as an apprenticeship in the future economy — one their family will be living in for the next forty years."
— James Alexander, General Partner02
How much, and where in the stack.
The honest answer to "how much" is enough to matter, not so much it hurts. For most families we speak to, that lands between 5% and 15% of total investable assets — meaningful enough that a good outcome moves the needle, small enough that a bad decade doesn't force a conversation at Sunday lunch.
The more interesting question is where. The illiquidity premium the asset class promises doesn't exist uniformly across stages. Our view — and the data broadly supports it — is that the premium is concentrated at the two ends. At pre-seed, you are paid for selection risk and extreme patience. At late-stage growth, you are paid for underwriting a known business at a price the public markets haven't yet set. The middle is where capital is abundant and returns are compressing.
Figure 1Net TVPI by stage, Australian managersVintage 2012–2018 · median, P25, P75Median Top quartilePre-seed4.6×2.8×Seed3.4×2.1×Series A2.8×1.9×Series B2.3×1.7×Growth2.9×1.8×0×1×2×3×4×5×Illustrative. Blended data from Cambridge Associates, Preqin and Galileo internal research, 2024. Pre-seed figures reflect Australian emerging managers only.
A reasonable shape for a family office programme looks roughly like this: one pre-seed or seed manager per vintage, two names maximum; one generalist multi-stage manager; selective co-invest alongside your managers, capped at 20–30% of total venture exposure. Add a late-stage growth manager only if you have a clear view on the strategy and the patience for the lock-up.
2A word on fund-of-funds: they can be useful for a first-time programme that wants diversification in a single commitment. They also stack a fee on top of a fee. Fine in year one — less fine in year ten when the family has learned enough to pick managers directly.03
Choosing managers.
This is the hard part, and the part where most of the mistakes get made. A few principles we would apply if we were on the other side of the table:
- Pattern of the partners, not the pattern of the fund. The fund thesis is a story the partners have rehearsed. The partners are what actually shows up at 11pm when your founder calls them. Meet them in person. Ask them to walk you through two bad deals, not two good ones.
- Cheque size should match the thesis. A pre-seed fund writing $3m cheques is not a pre-seed fund. A seed fund writing $250k cheques is not a seed fund. Thesis drift is the single most reliable leading indicator of poor returns.
- Reference the unfunded, not the funded. Every manager will hand you a reference list of founders they backed. Ask for the list of founders they passed on. The better ones will give it to you; the conversation tells you everything.
- Fund size is the most important decision the GP makes. It determines the cheque size, the return hurdle, and the kind of company that can return the fund. A $200m pre-seed fund is a contradiction; a $20m growth fund is too. Ask the GP what fund size they would pick if they were starting again. Listen carefully.
- Ownership > velocity. A manager who writes 40 cheques a year at 1% ownership is buying a lottery-ticket portfolio and calling it diversified. You want 20–30 names at 8–15% ownership — that is what power laws actually need.
Over to the partners
What we each push back on, when LPs ask.
JAJamesGeneral Partner
The fund-size question, every single time. A GP who can't articulate why their fund is the size it is — to a dollar — hasn't done the thinking the job requires. I would rather hear a contentious answer than a smooth one.
JFJuliaGeneral Partner
Portfolio construction. The number of times I've seen a "concentrated" fund with forty names, or a "diversified" fund with twelve. Ask to see the actual build — names, cheque sizes, reserves. The model tells the truth the deck doesn't.
HSHughGeneral Partner
Honesty about losses. If a manager can't walk me through their worst-performing investment with the same clarity as their best, I'm out. Venture is mostly a business of being wrong. Reflection on that is the job.
04
The honest questions, before you sign.
Below are the ten questions we think every family office should ask before writing the subscription document. None of them are clever. All of them are overlooked.
01
How is the management fee budgeted, line by line? Show me the model.
02
What is the hurdle for carry? Is it deal-by-deal or whole-fund?
03
What percentage of the fund do the GPs have personally committed?
04
What is your recycling provision and under what circumstances do you use it?
05
How is the LPAC constituted and what real authority does it hold?
06
Walk me through your worst-performing investment, start to finish.
07
What is the succession plan if one GP leaves during the fund life?
08
Who is your auditor, your administrator, and your custodian?
09
What is the expected capital call schedule? How flexible is it?
10
If you could change one thing about your last fund, what would it be?
3Question 10 is our favourite. The answer is diagnostic. A manager who says "nothing" is either lying or hasn't reflected. A manager with a crisp answer is someone who treats their own practice as a product to be iterated.05
The pitfalls we see, repeatedly.
Three recurring mistakes, in descending order of cost:
Allocating once, not programmatically. Venture returns are vintage-dependent. A single commitment to a single 2021 fund was, by any reasonable measure, a bad decision — not because the manager was bad, but because the vintage was. Committing the same dollar value across 2021, 2022, 2023 and 2024 produces a materially different outcome. The asset class rewards cadence. Treat it like a programme, not a one-off.
Confusing brand with quality. The best-known funds in any market are not always the best-returning ones, particularly for new vintages. Emerging managers — first, second and third-time funds — have historically outperformed established names at the early stage. This is not a Galileo talking point; it is in every credible LP-side study of the last twenty years. Pay attention.
Overweighting the GP's pedigree, underweighting their hustle. The CVs of most first-time fund managers in Australia are better than the CVs of most established partners at the big US funds. Pedigree is abundant. The scarcer thing is the partner who will fly to Adelaide on a Tuesday to back a solo founder with three customers — and then fly back on the red-eye to write the memo that night.
Founders Corner · Episode 03What LPs get wrong about emerging managers24:12 · Watch on YouTubeA follow-up conversation with two of our LPs on how they built their venture programmes — and what they wish they'd done differently.—
A closing note.
None of what we've written here is proprietary or controversial. It is the accumulated view of three partners who have, between them, raised from roughly eighty family offices across two funds, said no to more, and spent the better part of a decade watching who got it right.
If you are a family office considering a venture allocation — or reconsidering one — we are happy to take the call. We will tell you honestly whether Galileo is the right manager for you, and if not, we will tell you who is. That is the job.
— James, on behalf of the partners.Sydney, July 2025Notes & references
- Cambridge Associates, Australian & NZ Private Equity and Venture Capital Index, Q4 2024 update. Pre-seed figures are Galileo estimates based on 11 emerging managers.
- See also Preqin, Emerging Manager Report, 2024 — historical outperformance of Fund I and II vehicles vs. established platforms, concentrated at seed stage.
- Our thanks to the LPs who reviewed earlier drafts of this letter. Any remaining errors of judgement are ours alone.