From offices in Omaha and Silicon Valley, Stephen George took Jeff Skoll’s fortune and helped create a family office that invested like a private-equity firm, taking bets on technology, healthcare and clean energy.
Last year George walked away from managing billions for EBay Inc.’s (EBAY) first full-time employee to set up his own firm, Panorama Point Partnership LP, named after the highest point in Nebraska. He’s wagering he can attract enough capital from the wealthy at a time when some family offices -- money managers for the world’s richest individuals -- are shunning third-party funds altogether in favor of direct investments.
“I like shifting structures,” George, 46, said in an interview in his office, which is lined with photographs of icebergs. “It’s time for the next generation of private-investment models.”
George, who oversaw $5 billion as chief investment officer of Skoll’s Capricorn Investment Group, raised more than $80 million in the last six months from investors including Christoph Henkel, whose family founded German chemical-products maker Henkel AG. He is seeking as much as $500 million for the fund, which offers clients three different options to allocate money.
“It’s tough to be a new private-equity fund these days unless you have a verifiable track record and good story,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Smaller funds are having a tougher time raising money.”
Panorama investors can choose among three types of private deals: loans to mid-sized companies, purchases of family-owned businesses or stakes in technology firms poised to go public. Each category has a three-year investment period when capital can be called, compared with funds that usually require five years. They can decrease, increase or reallocate future investments annually by selecting technology one year and private debt the next.
Current investments include a stake in Addepar, a Mountain View, California-based financial-software firm, and the acquisition of a Midwest ambulance company set to close in the third quarter, George said.
Fundraising for new private-equity firms hasn’t been easy as investors cut back on the number of managers they work with, putting more money into the largest funds such as those run by Blackstone Group LP and Carlyle Group LP, said Gordon. Succeeding with a small capital base such as $80 million to start is even more challenging if fees are lower, he said.
Panorama charges families who invest at least $1 million this year a 1.5 percent annual management fee and takes 15 percent of the profits after investors receive an 8 percent annual return. It charges 2 percent and 20 percent, respectively, for those investing at least $250,000. Private-equity funds usually charge 1.5 percent to 2 percent and keep 20 percent of profits.
George founded Panorama with childhood friend Clarence Castner, who ran the University of Nebraska Foundation from 2008 to 2012. The new firm made its first investments this year, in four technology companies, and is closing three deals in family-owned businesses, George said.
He declined to comment on Capricorn’s returns during his tenure because the information isn’t public. Eric Techel, chief financial officer at Capricorn, declined to comment on George or the firm’s returns. Skoll is worth $4.3 billion as of June 13, according to the Bloomberg Billionaires Index. Capricorn manages money for Skoll and other families.
As much as $1 billion of Capricorn’s $5 billion in assets were allocated to direct investments during George’s decade as CIO, George said. He took stakes in businesses before they went public or were acquired such as social networks Yammer Inc. and Twitter Inc. (TWTR)
George grew up in Columbus, Nebraska, and graduated from Cornell University in 1989. He started as a financial analyst in New York among a group of rising stars at Bankers Trust Co., including Mary Erdoes, who now runs JPMorgan Chase & Co.’s asset management unit, and Thomas Connolly, a partner at Goldman Sachs Group Inc. (GS) It was a changing time on Wall Street as restrictions on investment banking imposed by the Glass-Steagall Act were unwinding, George said.
In 1995, he took a job at Goldman Sachs during another tectonic shift in finance: the dawn of Internet companies. He worked with wealthy families in San Francisco as Goldman Sachs helped take companies such as online marketplace EBay public in 1998. About three years later, Skoll asked him to help start a family office.
George said Panorama has an advantage over larger buyout firms because it won’t compete for large or public investments, instead using its Midwest location to find family-owned businesses that seek long-term owners.
Of the private-equity deals done year-to-date in the U.S., 3.72 percent happened in the Midwest, according to Seattle-based data provider PitchBook Data Inc.
“As an investor you’re always looking for uncrowded opportunities,” he said.