Octavian Pilati: Lessons from the past

With a family line that dates to the year 1000, Octavian Pilati learnt from an early age the weight and importance of legacy. But when a crisis saw him taking over the family business at the age of 26 and subsequently shepherding a successful exit, he saw an opportunity to break out on his own and advise others of the pitfalls of fractured family dynamics and unclear succession planning.

Coming with a 29-character-long surname, a rich family history and a mantra to “Turn adversity into opportunity”, Pilati talks exclusively to Campden FB about learning from the past and planning for the future.
 

You’re part of a particularly lengthy lineage…
Yes, the longer family history comes from my grandmother's side, the Khevenhüller-Metsch family, which was one of Austria's princely houses. In the times of the monarchy, we were quite a powerful family with a lot of land and responsibilities in the court. We can trace our roots all the way to Austria’s founding in the year 1000 AD. 

You took over the running of the family business in 2017, how did that come about?
We have always done the same things, forestry, agriculture, and some investments in industries - but the core of the business was forestry. I came on board through a crisis in the family business.

My father invested in a company, and he structured the deal by offering our land as security for a loan that the company took on. The company did teak plantations in Costa Rica, and they wanted to secure an expansion loan against our forests in Austria, because the interest rates here were about 1.5% - in Costa Rica, you pay 9%. My father agreed to the deal but, unfortunately, the company turned out to be a fraud. When this all came out, the banks called the liabilities and that's where we got into the whole sale process.

I took over the crisis management at the age of 26 in 2015. The whole process started in November 2014, and we were done by mid-2018. During that time, we looked at restructuring plans, trying to see if we could refinance the debt - which we couldn’t do because the whole case was so prominent in the media that most banks refused us. 

You were still very young when you took over the business. Did it feel overwhelming taking on such a challenge?
Actually, no, it did not. This was like a new challenge to jump into, I didn't think much about it… Then about a year after jumping into it, I had a much different opinion!

During your childhood, you gave guided tours around the family grounds and loaned school friends money (with a healthy interest rate). At what point did you realise you had you had a head for business?
My father kind of forced me to be a bit of an entrepreneur because he never gave me a lot of pocket money. I was always on a very short leash compared to my fellow students, who got a lot more from their parents. So I had to think of ways to increase my pocket money.

I had a clear goal, which was to save the family business.

Did you have any expectations on what you're going to do with the family business when you took over?
Well, when I joined, I had a clear goal, which was to save the family business. In the end we sold for a very good result, but I failed in my primary goal in a sense. But through the process of going through it, I realised that saving the family businesses in the way it was structured wasn't doable.

I always wanted to take our forestry business to the future. Forestry is still very conservative; You plant a tree; you wait 100 years and then you cut it down. And if you have a lot of land, you can do that in steps. And then you have a regular income.

I was looking at more modernisation and what you can do with forest land. Things like microbiology, where you can grow certain types of fungi, which the pharmaceutical companies pay a lot of money for, or plants like St John’s Wort, which you can grow below the trees. In southern America, a typical tactic would be to have a coffee plantation in your forest. So, there are lots of modern techniques where you can bring a forestry business from about 1.5-2% revenue on the wealth of the land up to probably 10% If you bring it all together.

Has your experience with the family business played a role in investment decisions under your private holding company Sub Umbra?
We sold the family company and my father split up the wealth after the sale. I got my share, and I didn't know what to do next to be honest. So, I went for a very conservative strategy where I put most of my money in real estate.

With real estate, you don't get the best revenues and you must start to think about sustainability and things like that. So, with Sub Umbra, we have a hybrid model where we have some real estate, and we loan money to other real estate developers. We also do some cryptocurrency and tech start-up investments.

Sub Umbra is purely your own business, how does that feel now that you’ve made the exit from the family business?
It feels quite good, because there's just two of us in the team and we make the decisions quickly and easily and with no family disputes involved. It’s very freeing.

Considering what’s happened in the past, is the Sub Umbra due diligence process extra robust?
Our due diligence process is very strict. We look very carefully to try and invest in things that we understand and then we do an extremely strong due diligence on the people. We check a lot of things that others don't, I get asked quite often, ‘Why am I doing this?’ And I'm like, ‘From our experience, you should be doing it too.’
 

I'm a risk-taking person. I must remind myself to be more careful.

With the lessons you’ve learned from the past, do you find yourself being more conservative when it comes to investments?
I'm generally more of a risk-taking person. I must remind myself to be more careful. My partner is the careful one, she looks at things in a lot of detail.

What motivates you to do your best work?
I love to turn adversity into opportunity. So, for example, with the start-up investments, we purely focus on hardware impact investments, something that makes the industry cleaner. I see the climate challenge that is ahead of us as a big adversity, but it brings a lot of new opportunities. I love a challenge and if there's a problem or if there's anything that's not working, I like to look at it and see how you can improve it.

Discover more about Octavian Pilati here.