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Family Offices Are Hot For Start-Up Investments - Report

Tom Burroughes, Group Editor , 9 April 2018

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A recent report, drawing on data about family offices' direct stakes in start-ups, suggests these organisations may be more enthusiastic about this activity than the wider investment market as a whole.

Family offices were involved in bigger tech start-up deal volumes in the five years to 2015 around the world, reaching 354 that year before dropping off to 298 and 272 in 2016 and 2017, respectively, according TechCrunch, the publication. And it suggests FOs are busier in this space than institutional venture players in general have been. 

The figures were drawn from Crunchbase data site, which was spun out of the TC business, and it covers 193 family offices listed in the figures.

“On a global scale, projected deal volume is roughly flat on an annualised basis from 2015 through 2017, whereas reported deal volume is down primarily due to reporting delays,” the TC report on the figures said. 

The TC report goes on to say that evidence suggests there are more family offices investing in more start-ups than is the case with institutional venture capital players. “Worldwide, in 2015, reported deal volume from venture capital firms was almost precisely 2.5 times that of 2010’s totals. But that multiple for family offices is roughly 6x. And….family office growth deal volume outperformed traditional VC between 2011-2017, 2012-12017 and 2013-2017,” the publication said. 

The picture of family offices being more active in types of tech investing chimes with anecdotal evidence that these organizations have become increasingly keen on venture capital, direct/co-investing routes in recent years, emboldened by promises of superior returns, albeit requiring lock-ups of capital and less liquidity. A period of very low, or even negative interest rates and low yields from conventional asset classes has helped drive the trend, practitioners say. On a less positive note, surveys of investors find rising concerns that valuations of portfolio companies in VC funds are less attractive than they were. 

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