Family offices up allocation for startups post Covid


Chennai: As more first generation entrepreneurs set up family offices and as the pandemic throws focus on digital businesses, HNIs and family offices (FOs) have increased allocation of funds to startups.
“Given the rapid run up in public markets worldwide during 2020, it is natural for FOs to increasingly look at re-balancing their asset allocation. This should favour increased allocations by FOs if their capital towards alternative assets — which includes PE-VC investments, both directly (into privately held companies) and indirectly (as Limited Partners), Arun Natrajan, CEO, Venture Intelligence, a firm that tracks PE and VC activity.
While FOs have traditionally invested in startups indirectly through VC funds, instances of direct investment in startups have increased, analysts said. While small in value currently, a key driver of this trend is VC funds offering co-investment rights to family offices.
Infosys co-founder and chairman of Axilor Ventures Kris Gopalakrishnan, who pioneered the trend of making bets on startups, says many senior employees at early startup success stories have now set up family offices and this has increased the exposure to the venture capital asset class. “Post the pandemic, the focus of family offices on tech and digital solutions in their business domain is seeing a rise- be it biotech, healthtech , consumer tech and others,” he said.
Waterfield Advisors, a multi-family office advisory firm, has noted an increase of almost 53% in the number of family office and UHNI clientele in 2020 compared to the previous year. The family office asset base managed by the firm has increased by around 19% in the same period. Rohan Paranjpey, director — head of alternative investments, at Waterfield Advisors, said that more FOs now show interest to co-invest in startups with VC funds and are keen to participate in pre-IPO and growth rounds.
LetsVenture Plus, a platform that launched in May 2020 in the peak of Covid to connect FOs with startups, has managed to bring on board around 150 family offices and 300 Ultra high networth individuals. “Our inquiries and onboards have been at an all-time high during the pandemic as there is a behavioural change toward digital,” Nimesh Kampani, president, LetsVenture Plus, said. Investors said Covid-19 has made family offices take a pause and reflect on next-generation businesses and allocate more capital to the startup sector. “Family offices are also backing venture debt funds actively. The Jetline Group has seen around 20%-30% year-on-year increase in exposure to startups, and quantum tech and enterprise tech are a few favorites,” Rajan Navani, vice chairman and MD, Jetline Group of Companies, said.
Gopal Srinivasan, founder and chairman of TVS Capital Funds that closed a fundraise of around Rs 2,000 crore recently, says family offices contributed to a large majority of the investor pool. The value family offices see in building new businesses has increased over the years. Cheque sizes and the evaluation and monitoring mechanism they employ is also maturing, Srinivasan said.


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