A transaction can look attractive in isolation while still creating poor portfolio fit or excessive concentration. Source-informed framework; apply the current governing documents and investor-specific facts.
Family Office Co-Investment Checklist
A transaction can look attractive in isolation while still creating poor portfolio fit or excessive concentration.
View chart data and assumptions
| Review area | Portfolio Fit | Sponsor | Company | Rights |
|---|---|---|---|---|
| Portfolio fit | Primary | Review | Context | Context |
| Sponsor quality | Review | Primary | Review | Context |
| Company risk | Context | Review | Primary | Review |
Key Takeaways
- Start with portfolio fit: An attractive company may still create excessive exposure to a sector, stage, manager, currency, or financing cycle.
- Underwrite the sponsor relationship: The lead investor may control information, allocation, follow-on context, governance, and exit decisions.
- Understand why capacity is available: The explanation can range from benign round-size constraints to weaker demand or financing risk.
- Review what the family office actually owns: Security terms, information rights, transfer restrictions, economics, and follow-on needs determine the investor's position.
A Public Example
FINRA's private-placement guidance is a useful reminder that private deals require reasonable inquiry into both the issuer and the offering.
- Deal diligence is not optional: Family offices should review company quality, cap table, terms, legal documents, conflicts, and exit assumptions.
- The practical lesson: A co-investment checklist should prove why this specific transaction deserves capital, not only why the sponsor is credible.
- Useful number: NVCA lists five core financing documents for many venture rounds: charter, stock purchase, investor rights, voting, and ROFR/co-sale documents.
1. Portfolio Fit
Sizing illustration: For a $100 million investable portfolio, a 1% co-investment is $1 million and a 2% position is $2 million. The loss case should be assessed in portfolio dollars, not only percentages.
The first question is what the position contributes to the family office's total portfolio.
- Sector and stage: Does the transaction add useful exposure or duplicate existing positions?
- Manager overlap: Is the company already held indirectly through one or more funds?
- Currency: What exchange-rate exposure will the investment create?
- Cost concentration: How much capital will the family office have at risk?
- Fair-value concentration: Could later marks make the position dominate the private portfolio?
2. Sponsor and Lead-Investor Diligence
Document count: A standard NVCA venture financing uses 5 linked core documents. Sponsor diligence should reconcile rights across all five rather than rely on the term sheet alone.
A co-investor often relies on the sponsor well beyond the closing date.
- Ownership: How much capital is the lead committing, and on what terms?
- Incentives: Do the sponsor's economics align with the co-investor's outcome?
- Reputation: How has the lead behaved with founders, co-investors, and LPs?
- Post-close role: Will the sponsor provide governance, company support, and financing leadership?
- Historical behavior: How does the sponsor respond when performance or market conditions weaken?
3. Company Quality and Market Structure
Runway evidence: Carta reported a record 856-day median gap between Series A and Series B in Q2 2024—roughly 2.3 years without assuming an interim bridge.
Review the business independently of the sponsor's enthusiasm.
- Market: Size, growth, and competitive structure.
- Product: Differentiation and the strength of the customer proposition.
- Revenue: Quality, retention, concentration, and repeatability.
- Economics: Margins, burn, runway, and likely future capital needs.
- External risk: Regulatory exposure and dependence on financing conditions.
- History: Prior rounds, investor support, and changes in company valuation.
A good company can still be a poor investment at the wrong price.
4. Entry Valuation and Security Terms
Series A reference: In Q1 2026, the US median Series A pre-money valuation reached $62 million and the median deal size $19.6 million, versus $21 million and $7.5 million in 2020.
- Pre- and post-money valuation: Confirm how the entry price and new capital affect ownership.
- Security type: Understand whether the investment is common, preferred, convertible, or an SPV interest.
- Liquidation preference: Determine who receives proceeds first and under what conditions.
- Conversion and pro rata rights: Review how the security can change and whether ownership can be maintained.
- Same-term participation: Confirm whether co-investors receive economics comparable to the lead.
A discount to the last round is meaningful only when that round remains a relevant reference.
5. Allocation Rationale and Adverse Selection
Ask why the allocation is available now.
- Benign explanations: The round may be larger than the sponsor can fund, the company may want a strategic shareholder, or the lead may have limited vehicle capacity.
- Potential concerns: Demand may be weak, the lead may face exposure limits, the company may have financing risk, or the offered security may differ from the sponsor's position.
6. Follow-On Capital and Liquidity
The initial check may not be the final capital requirement.
- Future financing: How much additional capital is the company likely to need?
- Participation capacity: Can and should the family office invest again?
- Non-participation: What dilution or loss of rights could occur if it does not follow on?
- Delayed exit: Can the portfolio tolerate a longer holding period?
- Down round: How do lower prices and new preferences affect the outcome?
- Alternative liquidity: What tender-offer or secondary-sale discounts may apply?
Decision Memo Checklist
- Portfolio contribution: What does the position add to the total portfolio?
- Supporting evidence: What independently supports the sponsor's underwriting case?
- Investor rights: What does the family office actually receive?
- Downside tolerance: What is the adverse case, and can the office absorb a full loss?
- Post-close reporting: Who will provide information, how often, and under what legal obligation?
Related reading: private technology co-investments and co-investment vs fund investment.
Adobe-Figma: include closing risk in the co-investment memo
The proposed $20 billion Adobe-Figma acquisition appeared to create a visible exit path in 2022. The parties terminated it in December 2023 when they concluded regulatory approval had no clear route.
The consideration was planned as a mix of cash and Adobe stock.
Adobe cited more than $400 million of expected ARR and net retention above 150%.
The companies continued independently after terminating the merger agreement.
What it shows: A co-investment memo should include downside paths even when an acquisition is signed. Review approvals, financing, termination rights, timing, security rights if the deal fails, and the company's standalone capital needs.
Primary sources: Adobe, proposed Figma acquisition (2022); Adobe and Figma, termination announcement (2023). Public transaction evidence only; this is not represented as a Frontierspace investment or result.
Frequently Asked Questions
What is the main portfolio risk in a family office co-investment?
Short answer: Concentration is usually central because one company can become a material share of the private portfolio. Sponsor selection and adverse-selection risk also require explicit review.
How should a family office evaluate the co-investment sponsor?
Short answer: Assess the sponsor's role, investment history, allocation rationale, conflicts, follow-on capacity, reporting quality, and economic alignment in the specific transaction.
Related Reading
Venture co-investments explained, Concentration and adverse-selection risk, and Company quality and entry valuation.