- Family offices manage over $6tn in capital, dwarfing the amount controlled by all venture capital firms in the world.
- Historically, the venture capital scene has not been a preferred investment arena for family offices. However, following an unstable 2022, they began showing more interest in startups in 2023.
- Family offices are predicted to cautiously increase their investment deals in 2024, given the health of the venture market and better access to top founders.
- High-impact projects rooted in substantial trends are most likely to draw the attention of family offices.
In the past, family offices have had a preference for real estate investments. However, the persistent high rates of interest and inflation have made this option less appealing. As a result, venture capital has begun to fill the vacuum. Some family offices, particularly those without prior venture experience, are expected to allocate between 3-5% of their capital to such investments. Those that have previously made profitable venture investments might be willing to return to the 10-15% allocation mark.
Family offices are now adopting a more discerning approach to their investment choices. They favor long-term, impactful projects linked to megatrends, with horizons extending beyond the usual 7-10 year lifespan of typical venture capital investments. These have been increasing initiatives from different sectors such as AI, greentech and healthtech.
American venture capitalists are known for their appreciation of ambitious founders and quick IPO promises. In contrast, family offices, who have typically accumulated their wealth over a longer duration, are not easily swayed by such promises. Moreover, they are well-acquainted with venture capital terminology and expect to see concrete figures and details instead of being sold on a promising concept.
Family offices have also grown more specific about the type of businesses they are willing to devote funds to. It is critical for entrepreneurs to align their pitches with the specific business segment the FO wants – B2B software, mobility-focused funds, etc. – within the allocated 10-15%.
Despite the growing sophistication of family offices, the importance of personal connection cannot be ignored. Building rapport, creating interest and making a positive impression remain crucial for securing investments.
