Family offices bet bigger on start-ups

Direct investment or co-investing with Indian VC/PE funds in companies is increasingly catching up

- SURAJEET DAS GUPTA

Till recently, most Indian family offices tended to by putting their money in venture capital (VC)/private equity (PE) funds. That's been changing since 2019, with family offices increasingly investing in companies via direct stakes or as co-investors with Indian-headquartered VC/PE funds.

The total numbers may not be high compared to the total investment being made by the Indian funds, but the pace is picking up (see table, "The family way"). Data based on investments made by active Indian family offices (which make at least three to four deals a year) in Indian companies hit a record $507 million in H1 2022, more than 2.38 times the previous year, according to Venture Intelligence, a research agency that tracks flows of VC/PE and family office funds.

The trend gathered momentum from calendar 2019, which saw over $660 million being allocated to companies directly. Although it lost steam a year later, dropping to just $200 million in 2020, in calendar 2021, family offices put in $543 million, but this year's first half numbers suggest that this figure could be exceeded by a generous margin.

All told, domestic family offices' direct investment in companies accounted for around 8 per cent of the total investment made by Indian-headquartered domestic PE, VC and family office funds at $6.3 billion in H1 2022.