The 42nd floor of 41 Madison Avenue is an enviable commercial penthouse. It has views of Madison Square Park and the golden spire of the New York Life Building next door. From the moment the elevator doors open, it’s clear the office is nicer than most.
Look more closely and something seems a little odd. There are employees at nice desks, but they don’t nearly fill the space. There’s almost no other furniture. No art on the walls. On the ground in a corner of the boardroom is a cardboard box with some wires and things hanging out of it. The new tenant hasn’t quite settled in yet.
Just two weeks ago, 3i Members, a growing, invitation-only community of more than 650 private investors, moved 10 floors to the top. It was time for an upgrade, as it continues to grow and hire.
Wealthy individuals have always formed groups, shared ideas and pooled their money to invest in all sorts of things, and organizing that on any level is not a new idea. However, better organization doesn’t guarantee efficiency or effectiveness, as two investors observed and learned.
Mark Gerson, founder of the expert network GLG, and Billy Libby, co-founder and CEO of the hybrid credit firm Upper90, were setting up virtual calls and hosting events on their own to talk investment ideas and realized the limitations. Then, in 2021, Gerson shared with one of his business partners, Teddy Gold, an abstract idea: A new, expansive network of private investors who could leverage their respective expertise and refine the flow of investment opportunities for the group. Gold loved it, and so he, Gerson and Libby co-founded the "Interesting Investment Institute" that year and called it 3i Members.
“GLG sort of pioneered in the investment in the expert network space. Mark grew what is now a behemoth, monetized it, and on the back of that built his own family office, and I think realized that investing is totally random. It's just a function of who you happen to meet at whatever gala or lunch, or industry conference. But there's no system or regularity to sourcing good deals,” Gold told Modus.
There’s no shortage of intimate group chats, huge organizations such as the SFO Alliance or Tiger 21, and many other sets in between, where family offices germinate investment ideas.
But can 3i, in a differentiated way, truly professionalize the perilous club deal? If its growth is any indication, maybe it already has.
Four years since it started, the 3i network that started with a couple of dozen of the co-founders’ closest friends and partners has over 650 members. Everyone must be recommended by an existing member, pass a background check, have at least two references, and make it through an interview with 3i.
The member network is equal parts established single-family offices, ultra-wealthy entrepreneurs who had a recent liquidity event, and established asset management professionals investing their personal capital (soliciting their own funds and opportunities is strictly prohibited).
Every month, Gold said, members fill the top of the deal funnel; they share about 150 investment opportunities with 3i to be considered for the group, usually by forwarding an email they received to the organization (these come from all kinds of places, he said). About a quarter of those meet the qualifications of a 3i scorecard and are then shared with members deemed experts on the opportunities.
The experts do preliminary due diligence, speak with the person, business, or sponsor raising capital, and then send their notes to 3i’s member-based investment committee. The committee then votes on the two best opportunities, shares all the relevant materials and data, and those are presented to the network on a monthly call. 3i also coordinates multiple calls with the sponsors and runs member-only meetings about the opportunities.
“Investing is hard and lonely, and you suffer from natural and built-in information asymmetry as a single LP on the other side of a sophisticated GP’s pitch. Through this crowdsourcing, we think we can get better diligence because we have access to so many experts within our community, and we can pull resources on things like legal and tax memos,” Gold said.
Most of the opportunities are private equity or private credit with expected internal rates of return within a few percentage points of 20%. About 60% of investments are through funds and 40% are direct deals. They don’t do direct venture investments or real estate, “because people have plenty of it,” Gold said.
The network has invested $800 million over the past three years. The average investment is $55 million, and the average check from each individual member is about $750,000. Leveraging the power of the network, 3i estimates it has saved members a total of $25 million in fees over the past three years.
3i never promises committed capital, doesn’t charge a management fee, and takes no carried interest. The cost to be a member of the network is $18,000 per year.
Other than the no-solicitation rule, there aren’t many others. 3i asks that members respond to all communication from others within 48 hours, even if it’s a brief note that they don’t have time to connect or help with something.
The network is predominantly North American, but there are concentrations of members and or 3i employees beyond New York in places one would expect: Miami, Chicago, Los Angeles, San Francisco, Toronto and London.
An expanding geography has attracted more members, all by word of mouth, and also enabled 3i to provide other benefits and services to the network, including a busy events calendar. It’s holding about 100 events per year now, Gold said. The organization has created some expected gatherings, like a lunch during the Milken Conference for 50 members. One member with a private art gallery in New York hosted a party for others last week. According to Gold, “What's happened now is I think people come for the deals, but stay for the community.”
There are also 3i WhatsApp channels and a member portal, where members can find and connect with each other one-on-one, as well as exclusive resources and research.
The new office on the 42nd floor will fill up. 3i is hiring, in New York and elsewhere. The company currently has 25 employees. Gold said there is no target number of members it plans to reach before 2026. “We could triple the size of this thing overnight with all the wrong members and ruin it,” he said.
And 3i has aspirations beyond helping members invest.
“Anytime you have a business investing or personal question or problem, my goal is that 3i is the first place you come to. ‘Hey, I need to switch lawyers. I'm evaluating a deal. I want help. My kid wants to switch schools. We want to take a summer vacation to a beach area. We need a good restaurant recommendation in Los Angeles.’ Whatever it is, we can help by using the power of the network,” Gold said.
Bill Gates Rethinks The Gates Foundation
“People will say a lot of things about me when I die, but I am determined that ‘he died rich’ will not be one of them. There are too many urgent problems to solve for me to hold onto resources that could be used to help people,” Bill Gates wrote this week in a long letter about the future of the Gates Foundation.
When Bill and Melinda started the Gates Foundation in 2000, the first charter stated the goal that it would sunset several decades after their deaths. Gates wrote that he began rethinking that approach in recent years.
“I now believe we can achieve the foundation’s goals on a shorter timeline, especially if we double down on key investments and provide more certainty to our partners,” he wrote.
The co-founder of Microsoft now plans to give away virtually all his wealth through the Gates Foundation over the next 20 years to the cause of saving and improving lives around the world. It will close its door permanently on December 31, 2045.
During the first 25 years of the Gates Foundation, in part with the help of Warren Buffett’s contributions, it gave away more than $100 billion. Depending on markets and inflation, Gates expects the foundation will spend more than $200 billion between now and 2045 (including the balance of the endowment and his future contributions).
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Other News
- Want to know if Modus has reported on something? The entire newsletter archive is available online and the company improved the website’s search function this week. Modus will improve this over time — reply to this email and let us know what other features you want.
- The Surprising Ways That Siblings Shape Our Lives.
- Blackstone President Jonathan Gray and his wife, Mindy, are donating $125 million to Tel Aviv University’s health science and medical school. The largest ever donation to the university will be used for, among other things, scholarships, facilities and to build a 600-bed dormitory that will accommodate higher enrollment; Israel has a shortage of doctors.
- Jeff Getty is the new chief tax strategist at Callan Family Office. He previously led the family wealth consulting team and formed the business advisory practice at Key Bank.
- In 1940, F. Scott Fitzgerald was worried about “The Great Gatsby.” The novel he had penned 15 years earlier wasn’t selling. “My God I am a forgotten man,” he wrote to his wife, Zelda. Fitzgerald died less than a year later. Today, a century after it was published, the book known for themes of wealth, class and relationships, remains one of the most widely read by students.
“My whole theory of writing I can sum up in one sentence,” Fitzgerald wrote in 1920. “An author ought to write for the youth of his own generation, the critics of the next, and the schoolmasters for ever afterward.”
Jobs
- Alexandra Idol is hiring an investment analyst at her family office, Rosehill Investors.
- A Houston-based family office is hiring a chief financial officer. This office was founded by an entrepreneurial principal in 2021 to serve three generations of family members, so the CFO needs to be ready to do it all: tax, accounting and reporting, fiduciary, investment management, property management and philanthropic interests of the family and all their related entities. It sounds like this person will also play a big part in doing a bit of a technology overhaul, too. You need a minimum of 20 years of experience in accounting. The description has few compensation details.
- A multibillion-dollar investment company in Chicago is hiring a controller. This person will report to the CFO and oversee the company, its subsidiaries, and, seemingly, the owners’ tax and accounting landscape. Pay is $190,000 plus a bonus.
Join 65 other family offices — there are only a few spots left — for a full day of networking and insights from experts, including:
André Perold, HBS professor and CIO of HighVista Strategies
Roger Ferguson, former vice chairman of the Federal Reserve
Jim Tananbaum, CEO of Foresite Capital
Rebecca Patterson, economist and former chief strategist at Bridgewater
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