These banks are on a mission to woo billionaire heirs
Personal Finance / 21 January 2019, 4:30pm / Sophie Alexander , Suzanne Woolley , and Reade Pickert
It’s karaoke Thursday in Silicon Valley, and the song that ought to be playing is Travie McCoy’s “Billionaire.”
After all, the young people gathered at Fred’s Place, a dive bar not far from the Googleplex in Mountain View, California, were fabulously rich. But while McCoy sings of making a hypothetical fortune, this group was born into billions.
They had come from around the globe as part of Big Finance’s latest pitch to the richest of rich kids: you, too, can play in Silicon Valley. Never mind that the Zuckerbergs and Gateses of the world didn’t start out with vast family fortunes behind them—after the last decade’s tech boom, even already loaded millennials want a shot at the next big thing. Private banks, eager to curry favor with the next generation of billionaires, are clamoring to give them an inside edge.
Citi Private Bank, Deutsche Bank, Morgan Stanley and BNP Paribas’s Bank of the West have all started special Silicon Valley programs for the offspring of their most valuable clients, providing exclusive access to startups and tech investors, along, of course, with time to unwind and network at a local watering hole. The trips, branded as “summits” or “experiences,” are crash courses on cutting-edge tech, meant to inspire as much as to inform.
“We’ve found that about one-third of heirs to family businesses want to be entrepreneurs in their own right,” said Money K., head of Next Gen programming for Citi Private Bank, which has hosted two “Frontiers Conference” events in Silicon Valley. “They want to be the next Mark Zuckerberg.”
For the banks, it’s a way to garner loyalty among millennials who may prefer up-and-coming tech to old-guard Wall Street. With the finance industry facing the biggest transfer of wealth in history—93 of the 500 richest people in the world are at least 80 years old, according to the Bloomberg Billionaires Index—money managers are pulling out all the stops to hold their ultra-wealthy clients close.
The programs are far more involved than the typical Silicon Valley tourist outings that stop at Steve Jobs’s childhood home or Facebook’s thumbs up headquarters sign. The banks partner with startup accelerators and tech think tanks, packing multiday events with talks from founders, CEOs and venture capitalists.
Wealth managers “want to leverage our strong foothold in the Valley with entrepreneurs, with venture capitalists, and use that to expose their clients, especially the kids of the ultra-high net worth, to new means of diversifying,” said Omeed Mehrinfar, who helps oversee corporate partnerships for Plug and Play Tech Center, a startup accelerator that has worked with Deutsche Bank and BNP on their Silicon Valley programs.
Cameron Teitelman, an entrepreneur who stumbled upon the wealthy crew gathered at Fred’s Place after a Deutsche Bank event in October, said he’s “constantly” approached to take part in tech tours. He founded StartX, a community of Stanford-affiliated startups, and has so far turned the requests down—but is starting to reconsider. “Give us the money to pay us to do it, and maybe it’s worth it,” he said.
Many participants in the banks’ events find that it is. The programs are a melting pot of money and innovation, which creates an opportunity for everyone involved.
For the billionaires-to-be, it’s a chance to broaden networks, perhaps to eventually invest in a startup or partner on a deal down the road. For the startup accelerators, well, hosting a group of wealthy young people to network with their entrepreneurs could open up all sorts of possibilities.
“If you have two or three big family offices and they all deploy funding into a startup, that almost guarantees success right there,” said Mehrinfar.
Anna Karmann, 34, has been to all three of Deutsche Bank’s NextGen Innovation Summits, one of which was in Los Angeles, and said they’ve helped her develop some of her most important personal and professional contacts. “It’s basically the most influential week of the year for me,” she said.
Karmann, a physician-scientist at Stanford, ended up investing in Click Diagnostics, one of the startups that presented at the 2017 event, and said the roots of the company she co-founded, Sailfield Inc., are from connections she made at the programs. Last year, she brought her husband, Wilhelm Oliver Karmann, part of the family that founded the eponymous German car company.
The tours take evening outings to places like Regale Winery & Vineyards and Michelin-starred Dio Deka restaurant. The daytime speakers are pretty prestigious, too, with schedules touting entrepreneurs like Twitch co-founder Kevin Lin, who sold his company to Amazon.com Inc. for $970 million. Deutsche Bank’s Los Angeles event included Javier Verdura, Tesla Inc.’s director of product design, and Hollywood talent titan Ari Emanuel, the model for Ari Gold on HBO’s Entourage.
“It sort of feels like when you were a child and you go on class trips with your school,” Karmann said. “You’re put together with a bunch of like-minded international people in Silicon Valley and you grow and network and learn all together.”
Those connections may come into play as heirs figure out how to manage, and hopefully swell, their fortunes in a world where everyone—from centuries-old banks to adolescent startups—has advice on how to handle their enormous inheritances, and it’s not always easy to pick the winners from the losers.