This article is published in collaboration with our partner, 3i Members.
Mark Gerson co-founded Gerson Lehrman Group, a leading expert network, and recently co-founded 3i Members, a global deal network of 400-plus investors — all of whom have exited a company or lead a family office. Gerson is also chairman of United Hatzalah, a network of volunteer medics in Israel, and the African Mission Healthcare Foundation, which supports missionaries performing medical care in Africa.
Q. How and why did 3i Members form?
A. We co-founded 3i Members after asking the question: “Where did the most compelling deals we did in the previous several years come from?” By compelling deals, we specifically focused on opportunities that we believed we could underwrite at a 25%+ IRR — and did as expected (no better, no worse). We realized that investors who were looking for these deals only got them very seldomly. But if we created a community of investors who got them seldomly and set up the systems and processes to enable deal sharing and curation by and among these investors, everyone would have consistent and reliable access to what we then had sporadic access to.
Q. Where do you see the role of investment networks headed in the next five to 10 years in the context of family offices?
A. I can only speak to that of 3i Members. We will continue to welcome family offices that invest significantly, rigorously, thoughtfully and whose principals are community-minded. This kind of growth ensures that the deal flow the members select for presentation will be drawn from a highly qualified and larger group.
Q. What criteria should family offices consider when deciding to join an investment network like 3i Members?
A. I think it depends on the network. 3i Members is not so much a network as a genuine community of people who are there with and for each other. Consequently, the family offices in 3I Members have deal flow to contribute with no expectation of regularity, want to consider an eclectic supply of compelling deal flow and want to engage with other members of the community at events and otherwise.
Q. From your experience, how do investment networks like 3i Members enhance the decision-making capabilities of family offices?
A: 3i Members enhances the decision-making capabilities in, primarily, two ways:
The first is through surfacing investment opportunities through crowdsourcing — and with the remarkable crowd that 3I Members constitutes. All members invest significantly, actively, rigorously and have compelling deal flow. Consequently, around 25% of the now 450 members submit an opportunity for consideration each month. A committee of members selects the two or three that they believe will be most compelling to the membership. This assures a consistent and reliable source of interesting, diversified and compelling opportunities that each member can consider for him or herself.
The second is, again, through crowdsourcing. In any given opportunity, dozens of members will engage rigorously with each other. This community-based assessment — essentially, it means that each member has a highly qualified investment committee for each opportunity, composed of other members — yields consistently valuable and highly informed perspectives that enable each member to make a more confident decision.
Q. What metrics or indicators do you believe family offices should focus on to measure the success of their investments in the current economic climate?
A. 3i Members are now looking for what one of our members described as “noncorrelated high-yielding income streams.” These are often in esoteric industries and sectors and are thus very hard for any individual to come by regularly and dependably. But in a community of 400-plus members, they come consistently and reliably.
Q. How can investment communities support family offices in planning for generational wealth transition?
A. 3i Members has evolved into much more than a platform for investment opportunity production and consideration. In forums that 3i Members sets up and through relationships at events (online and offline), members are always in conversation with each other about these kinds of issues, among others.
Q. Why should high-net-worth individuals consider an investment network vs. traditional investing methods, such as through a bank's advisers?
A. The key is crowdsourcing. The opportunities selected by 3i Members are generated by members, who are committing capital to the opportunity and have done so in the past … and can speak to the opportunity with the knowledge enabled by experience and the conviction demonstrated by an investment. We do not believe that there could be an investment team in the world as good as the collective ability of hundreds of highly qualified and motivated people working together to generate and assess the best investments.
Q. How does the community support provided by 3i Members extend beyond traditional investment advice?
A. Members know that whatever they are thinking about, striving for or struggling with, regardless of how big or how small, there is another member who is capable and enthusiastic to help. We’ve seen the applications range from making significant loans, to getting kids internships, to education, to trusted vendor referrals, to restaurant recommendations, to charity partnerships and hundreds of other things.
3i Members is an invitation-only community of private investors sharing deals, insights and contacts. With a focus on alternative and off-market deal flow, shared benefits and investor services, 3i Members serves as a kitchen table around which highly engaged high-net-worth individuals can discuss and debate compelling, unexpected opportunities in emerging sectors.