A Cautionary Note on Private Investments: Lessons for Families Across Generations

February 2026

Across many successful Nairobi families, we are seeing a familiar pattern. The rising generation is increasingly drawn to private investment opportunities. These range from venture capital and private equity to climate technology, fintech, real estate syndications and a wide variety of informal private placements shared through personal networks.

Some of these opportunities are interesting. A few will work. Most will not. And this is not because the rising generation is careless. It is because the environment they operate in is very different from the one their parents and grandparents knew.

Founders built wealth through years of hard work, long hours, difficult regulation and real operating risk. They created capital through effort. The rising generation inherits capital with an expectation of stewardship. That shift creates a natural desire to participate, express, create and contribute. Private investing feels like a modern way to do that. It feels entrepreneurial, forward looking and meaningful. It does not feel like the slog previous generations endured.

There is nothing wrong with this instinct. But enthusiasm without structure exposes families to unnecessary risk.

The recent collapse of a high profile Nairobi venture is one example. For years, it was viewed as a success story. It had international investors, strong credentials and widespread adoption. Then it failed abruptly. The point is not that single company. The point is how quickly a private venture with a compelling story can deteriorate, and how easily well intentioned families can find themselves exposed to risks they did not see.

Below are the key lessons we want families to understand.

1. A strong story is not due diligence

Private companies often present polished narratives. They highlight scale, disruption and positive impact. What they do not offer is the level of disclosure that regulated public markets require. Without detailed, audited and consistent reporting, families cannot assess risk properly. A story can be impressive while the foundation is fragile.

2. Complexity masks fragility

Private ventures often combine regulation, supply chains, technology, donor funding, currency exposure, carbon markets and key person dependency. Each element introduces risk. When one part fails, others often follow. Families underestimate this because the pitch focuses on opportunity rather than structure.

3. Governance varies widely

Private investments often provide limited reporting, limited investor rights and minimal influence over decisions. Investors frequently discover the true condition of the business only after capital has been impaired.

4. Social proof can be dangerous

In Nairobi, investment ideas move through social networks quickly. Other families are investing. Friends are enthusiastic. The opportunity feels familiar and endorsed. Familiarity creates a false sense of safety. Social proof is emotionally persuasive, but it does not reduce risk. It increases the likelihood that multiple families face the same losses at the same time.

5. Liquidity cannot be assumed

Once invested, families soon learn that exiting a private position is extremely difficult. There is rarely a functioning secondary market. When signs of trouble appear, investors often have no way out. A private investment can become illiquid or written down long before families have time to respond.

6. Rising generation enthusiasm needs structure

The challenge is not enthusiasm. It is enthusiasm without scaffolding. The rising generation did not experience the hardship and uncertainty that shaped previous generations. They are starting from stability and want to make a contribution. That is natural. But without pacing rules, diversification boundaries and clear decision rights, private investing becomes a personal project funded by family capital.

Why This Pattern Is Especially Strong in Nairobi

This dynamic is not unique to Nairobi, but it is particularly visible here. It also appears in Lagos, Joburg, Mumbai and Dubai, where private capital networks are concentrated and entrepreneurial culture is celebrated.

Several factors shape this reality

1. Nairobi’s wealth ecosystem is socially interconnected

Families with capital often know one another. They share circles, advisors and community networks. When an opportunity spreads socially, it feels trusted before anyone has analysed it.

2. The city has a strong storytelling culture around entrepreneurship

Nairobi is full of compelling venture narratives. Climate technology, fintech, logistics, agriculture and carbon markets produce stories of innovation and transformation. These narratives make private ventures feel like the future and create a sense of participating in progress.

3. The rising generation is influenced by global venture culture

Many younger family members have lived or studied abroad. They see venture capital celebrated. They see peers launching startups. They see fast success stories online. They come home wanting to participate. They want to be builders. They want to contribute without replicating the struggle of previous generations.

4. Previous generations worked through scarcity. The rising generation lives in abundance

Parents and grandparents operated in uncertain, volatile environments. They had no choice but to be cautious. The rising generation begins from a place of security. Their risk perception is different. They can afford to experiment emotionally, even when the family cannot afford the consequences financially.

5. Regulation is still developing

Private deals in Nairobi operate without uniform disclosure standards or investor protections. Families often believe they are investing in a structured opportunity when in reality they are entering an opaque and unregulated space.

6. Success stories create pressure to imitate

Every few years, Nairobi produces a widely celebrated business. These stories circulate quickly. Families feel they are missing out if they do not participate in similar opportunities. This creates cycles of repeated overconfidence.

In this environment, families who lose capital often describe the experience in very human terms. They feel misled. They feel taken advantage of. They feel they were pushed into a role they did not recognise at the time. They eventually realise they were not given privileged access. They were simply accessible. Structure is the protection.

Private Investing Is Not a Casual Activity

There is a more fundamental reality to acknowledge. Private investing is a specialised, highly professional field. The individuals and institutions who do it well work full time, operate within disciplined teams and rely on extensive data, research and governance. Even with all of this, professional private equity firms, venture funds and institutional investors see high failure rates. They know most private investments will not succeed. They build processes to manage this. They survive it.

For private families, especially those outside institutional frameworks, the situation is very different. The opportunities they are shown often come after professional investors have declined them. Families are approached because they are visible, trusted and socially connected. They rarely have access to the information, due diligence capability or risk modelling that institutional teams rely on. Without professional scaffolding, private investing becomes concentrated exposure to opaque risk.

Families who have lost capital often tell us they eventually realised something uncomfortable. They were not investors in the institutional sense. They were participants in someone else’s fundraising cycle.

There Is a Better Way to Access Private Markets

Private markets are not inherently unsuitable for families. Many of the family offices we advise do participate in private investments, but they do so in a regulated and professional way. When appropriate, we use institutional grade partners who specialise in private markets and operate with the governance, data and discipline required for this space. These include global firms such as HarbourVest and similar institutional managers whose entire purpose is to underwrite, diversify and monitor private market exposure properly.

This approach gives families access to the private market opportunity set without exposing them to concentrated, high risk, unregulated deals that circulate informally. It ensures the allocation is sized correctly, fits within the long term plan and is supported by professionals who do this full time.

If a family still wishes to take private positions directly, our advice is straightforward. Keep the allocation modest. Set clear pacing rules. Require full transparency. Define an acceptable loss limit. Put proper governance around decision making. Treat every position as part of a structured risk budget rather than a standalone opportunity. Families do not need to take reckless risks with hard earned capital, especially when safer, well governed alternatives already exist.

Our Guidance to Families

• Keep core capital in regulated, globally diversified portfolios
  This is the foundation of long term wealth preservation.

• Make private investing modest and deliberate
  It should be governed, sized correctly and aligned with the family strategy.

• Do not rely on us for due diligence on unregulated private placements
  These fall outside regulated oversight and carry risks that are difficult to quantify.

• If you choose to invest privately, use structure
  Set allocation limits. Establish pacing rules. Agree on acceptable loss limits. Require transparency and oversight. Treat each private investment as part of a defined risk budget, not an exception to your plan.

Closing Thought

Private investments can play a thoughtful role in a long term plan, but only when approached with humility, structure and professional oversight. They require an understanding that strong stories do not guarantee outcomes. They require honesty about the psychological and cultural forces that shape decision making. They require governance that protects families across generations.

Founders built wealth through resilience and sacrifice. The rising generation is being asked to preserve and grow that wealth through judgment and discipline. Our role is to support families in making decisions that honour the hard work that came before and protect the opportunities that lie ahead.

To discuss how private investments can fit into a long-term family strategy, contact us at info@waughmcdonald.co.ke