By Hudson Leung, Principal Venture Strategy at Mach49

In the Western context, the ‘family business’ is seen as traditional and rigid, while publicly traded companies are touted in popular business and management discourse. Yet globally, the reality is that family-owned enterprises comprise the majority of large companies (>$1 billion in revenue) in many regions — as much as 80-90% in Asia and Latin America. As such, their roles in the local economy cannot be understated, and their foundations for long-term growth and re-invention cannot be underestimated.

I should know: I built ventures for family-owned enterprises and know exactly the perks and pitfalls of doing so, firsthand.

Prior to joining Mach49, I launched and advised multiple startups and corporate ventures in Southeast Asia. In one memorable instance, I helped a top luxury mall operator in Thailand launch an integrated Online-to-Offline (O2O) and loyalty platform during the COVID-19 pandemic.

The family ownership and management of the enterprise were willing to make bold bets to go digital, even if there wasn’t necessarily a quick, short-term payoff. They knew that, to proceed with pure brick-and-mortar retail across their portfolio of luxury malls, would be a major disadvantage as the consumer experience at all levels of spending goes omnichannel.

Moving decisively, in under two years, they built a tech, product, and platform operations team of well over 100 people. This critical talent base has allowed them to respond and build quickly as the luxury retail world continues to evolve.

This anecdote above illustrates several elements of what makes family-owned businesses uniquely suited to growth through venture building:

• No rush for immediate results. Without the pressure to deliver quarterly results to shareholders, family businesses can think generationally, nurturing long-term projects that could take as long as decades to bear fruit, but may become future pillars of growth.
• Unity starts at the top. When those who own and those who lead are the same, setting shared goals across the company when starting ventures becomes simpler.
• Insights from multiple industries. Many family businesses, especially in developing markets, are diverse conglomerates. This gives them opportunities to develop inventive collaborations and to derive proprietary insights from different data sources across industries.
• Money in the bank. Successful family firms often have substantial cash reserves, giving them the ability to fund new ventures without needing to raise money externally.

These characteristics can be potent growth advantages for family-owned businesses. However, in practice, these enterprises also face several common obstacles when exploring opportunities for re-invention:

• Intricate company structures. Even with momentum for change at the top, figuring out who calls the shots underneath can be tricky when different family members are in charge of different departments — or influencing decisions from entirely outside the corporate structure.
• Hesitation to adapt. Large, established enterprises may be slow to undertake ‘expensive’ experiments into untested new growth, especially if they are seen as potentially disruptive to a consistent engine of current profit making.
• Short-term thinking. Those deeply involved in the main business might not have the incentive structure or the capacity for long-term strategic planning.

Taken together, family-owned businesses are a big, yet still untapped, source for disruptive growth, especially in developing markets.

While complex family dynamics can present hurdles, these enterprises have unique strengths that prepare them for corporate venturing success. An approach that is tailored to publicly traded companies may not work for family-led firms. But, with context-appropriate introduction of entrepreneurial processes, governance, and culture elements, family-owned businesses can align their long-term investment plans, resources, and multi-industry insights to drive significant new growth — for themselves and the markets they are part of.