At a time when the Indian start-up ecosystem is grappling with the funding winter, family offices are stepping up investments in start-ups, especially early-stage funding rounds. Experts pointed out that besides seed, angel and pre-series A funding rounds, there is now also growing interest among family offices to back Series A to Series C rounds in recent times.
Nandini Mansinghka, CEO, Mumbai Angels said, “ We have started seeing family offices making separate allocations for early stage ventures. This could be anywhere between 2-5 per cent of their overall funds. Large family offices now have separate teams to evaluate early stage funding opportunities. At the same time, smaller family offices have begun working with investment platforms like us to invest in early-stage start-ups.”
Family offices are seen increasingly allocating 10-20 per cent for start-up investments. As per various estimates, there are currently 300 family offices in the country which are actively involved in funding start-ups and expected to surge over the next few years.
“The funding winter has made start-up investing even more attractive for family office investors. The valuations have come down from the sort of esoteric levels earlier. Also, with many institutional investors pulling back on new investments, family offices are getting access to good quality deals with better entry pricing. Since the family offices do not have a predefined exit period they are utilising this opportunity to enter their choicest start-ups at better valuations,” said Munish Randev, Founder & CEO, Cervin Family Office & Advisors.
Large number of early stage start-ups, smaller investment ticket sizes and growing number of angel networks are some of the factors that have made participation in early-stage rounds attractive for family offices. “ But lately, the demand from relatively older family offices is shifting towards the Series A to Series C space since they now wish to diversify their holdings,” Randev added.
Andy Khanna, Partner, Deloitte India pointed out that infact 40 per cent of the family offices in India have nearly doubled their investments in private markets over the last 5-6 years. “Despite this positive build up and momentum, family offices continue to be a small segment of the overall PE/ VC landscape; having contributed to not more than 5 per cent of the number of PE/ VC deals and not more than 2 per cent in PE/ VC investments by value in FY22-23,” Khanna added.