When a Founder Wants Your Capital and Network, but Not Your Control

Finnish AI enterpreneur Peter Sarlin raised €25 million for QuTwo without bringing a conventional venture capital fund into the round. Around three dozen private investors participated, including technology founders, professional investors and Dieter Schwarz’s family office D11Z.

QuTwo gave investors access to a young AI and quantum-computing company without giving any one shareholder much control. Sarlin and co-founder Kuan Yen Tan retained management authority and sold about 8 per cent of the company in the round.

The structure suits a founder who already has bargaining power. Sarlin sold his previous company, Silo AI, to AMD for $665 million. He did not need an institutional investor to supply credibility or organise the round. Instead, he selected individuals whose experience and contacts could help QuTwo while avoiding the governance demands that often accompany venture capital.

No Lead Investor Means Nobody Else Owns the Due Diligence

A conventional venture round often has a lead investor. The lead negotiates valuation, examines the company, pushes on the financial model and agrees the principal shareholder protections with the founders. Other investors still conduct their own work, but the round has somebody with enough capital and influence to challenge management. A syndicate of 30 private investors does not automatically have that person. 

QuTwo entered the round at a €325 million valuation including the new capital. The company was founded in 2025. It already employs about 50 people, has customers including Zalando and reports orders worth €20 million.

Those figures give an investor something concrete to examine, but they do not settle the valuation. An investment team still needs to understand how much of the order book has turned into revenue, the duration and quality of the contracts, customer concentration, operating expenditure and the amount of capital the business expects to consume before another financing.

A family office investing €1 million or €2 million alongside prominent entrepreneurs has little reason to reproduce the work of a large venture fund. It still carries the loss if the price proves too high.

Large syndicates make that problem easier to overlook. Each participant knows that experienced investors have seen the company. Nobody should assume that another participant negotiated on their behalf.

Sarlin Is Selling Access on His Terms

Most early-stage founders spend considerable time persuading investors to provide capital. Founders with a previous exit operate differently.

Sarlin has already built an AI company that attracted a large corporate buyer. Investors who want exposure to his next business compete for allocation rather than simply deciding whether to fund an unknown management team. He can therefore choose what type of shareholder enters the company and what that shareholder receives.

QuTwo wanted investors who had built or backed leading businesses. The founders wanted their contacts and experience but retained the ability to run the company themselves. An individual investor might own shares in QuTwo and receive access to management without receiving the board influence that a venture fund investing the same amount would normally negotiate.

Family offices often accept such arrangements because access itself has value. Some founders will not offer better terms. Walking away means losing the investment entirely. Investment committees still need to separate scarcity from price. A difficult-to-access deal is not automatically a good investment.

Minority Ownership Depends on the Shareholder Agreement

A family office often prefers direct investments partly because it chooses the company and knows the founder. Neither gives the investor much protection when interests diverge. The documents determine what happens when the company raises more money, sells itself or changes direction.

An investor needs to know whether it receives regular financial information, whether it has the right to participate in future rounds and what happens if later investors receive better economic terms. Transfer rights matter if the family wants to sell before an exit. Tag-along provisions matter if the founders sell their shares. Different share classes can also leave two investors with similar ownership percentages but very different economics.

The challenging discussions come later. A company misses its targets and needs fresh capital at a lower valuation. Management wants to issue a new share class. A strategic buyer offers a price that satisfies the founder but not an investor who entered at a high valuation. New investors demand liquidation preferences that sit ahead of the existing shareholders. A board seat does not solve every one of those problems, but weak contractual rights leave a minority investor with few alternatives.

The Next Financing Matters Before the First One Closes

QuTwo raised €25 million, but technology companies at this stage often return to the market.

If the company raises another round, its existing shareholders decide whether to invest more or allow their stakes to dilute. A family office that wants to preserve a 1 per cent holding needs both the legal right to participate and enough capital available when the company asks for it. 

Private investment allocations often focus on the amount committed at entry. A €2 million investment becomes a larger capital decision if the family intends to maintain its ownership through several rounds. Reserving another €2 million or €4 million changes the economics of the original allocation and the amount of liquidity the family needs to hold elsewhere.

A later institutional investor also enters with its own demands. A venture fund writing a much larger cheque may request board representation, preference rights and stronger information provisions. Early private investors then find themselves sitting behind a shareholder that negotiated protections they never obtained.

The founder-friendly terms that secured access at seed stage remain in force unless the next financing gives existing investors an opportunity to renegotiate them.

Family Offices Bring More Than Money

Sarlin did not assemble his shareholder group only for its capital. Founders such as Xavier Niel and Niklas Zennström have built technology businesses. Professional venture investors understand later fundraising. D11Z brings the network of a family associated with one of Europe’s largest retail groups.

Introductions to customers, potential employees and future investors have commercial value, particularly when an early-stage company wants to grow quickly. A family office with operating businesses may also introduce management to suppliers or partners that a financial investor cannot reach.

The relationship therefore requires more attention than the original cheque. Someone inside the family office needs to decide which introductions the family will make and how closely it wants to work with management. The founder may call a family member directly. Portfolio managers may receive requests for potential customers or executives. A company preparing another round may ask its existing shareholders to introduce investors.

A family that spends time and reputation helping a company does not automatically receive more equity for doing so. Some family offices want that role. Others want direct exposure without becoming an extension of the company’s business-development team. The investment terms rarely settle the distinction.

A Different Type of Direct Investment

Family offices have become attractive shareholders partly because many founders do not want everything that comes with institutional venture capital.

Private investors often have longer investment horizons. Entrepreneurial families understand ownership from the founder’s side. They may tolerate periods in which a company prioritises product development over the milestones that a fund needs to meet within a fixed investment cycle.

Founders notice those differences and they also know that a family office rarely has the same organisational machinery as a venture fund. A fund employs teams to analyse investments, negotiate financing terms, sit on boards and manage follow-on rounds. Some family offices have built similar capabilities. Many have not.

A founder who has several potential investors can take the family office’s money without adopting the venture fund’s governance structure. The family office then has to decide whether access to that founder compensates for the weaker position.

QuTwo offers a clear version of the trade. Sarlin obtained capital from people whose experience and networks he values while retaining control of the company. His investors gained access to a founder with a previous €665 million exit and a place in a financing round that did not need a traditional venture fund.

Their return will depend on the company Sarlin builds, the price they paid and the rights attached to their shares. The names alongside them on the shareholder register do not change any of those three.

What Family Offices Should Take From It

Direct access to a strong founder does not reduce the work required before investing. It often increases it.

Family offices considering founder-led private rounds should be clear on five points before committing capital:

• Who is leading the investment work? If nobody has formal responsibility for valuation, diligence and negotiation, the family office has to do that work itself.

• What rights come with the shares? Information rights, follow-on rights, transfer provisions and protections in later financings matter more when the investor has little formal influence.

• How much capital will the investment really require? The first cheque may be only the beginning if the family wants to avoid dilution in later rounds.

• What does the founder expect beyond money? Introductions, recruitment help and access to the family’s business network consume time and reputation.

• Is scarcity distorting the investment decision? A sought-after founder can dictate terms. Limited access should not replace a view on valuation, governance and downside risk.

Family offices have become attractive to founders because they offer patient capital, operating experience and useful networks without always demanding the governance rights of a venture fund. That is precisely why the family office needs to know what it is giving up before it joins the round.

Article source: Picture is created by AI