SVB Capital, the global venture capital investment arm of SVB Financial Group (NASDAQ: SIVB), today released “Family Offices Investing in Venture Capital – 2021-2022,” a four-part report developed in partnership with Campden Wealth. Part one, entitled, “A Roadmap to VC Success,” looks at the venture investing maturity model, investment structures and how venture deals are sourced. The report also includes lessons learned and tips from experienced family offices to those just starting out in the asset class.
Within SVB Capital, the Family Office Practice works with qualified family offices to provide curated access to private investment opportunities both within SVB Capital and with fund managers and venture-backed companies. SVB LIFT, SVB Capital’s invite-only platform connects LPs to a curated set of venture funds. If interested, please contact Shailesh Sachdeva for more information.
“We are incredibly excited to share the findings of our 2nd annual ‘Family Offices Investing in Venture Capital’ report,” said Barry O’Brien, Head of the Family Office Practice at SVB Capital. “Our team has had conversations with hundreds of family offices around the globe, helping them access the venture ecosystem through Fund of Funds, direct VC funds or directly into world class startups. The key observation from those conversations, further validated by this year’s report, is that most family offices follow a similar path when investing in venture. Most start by investing in fund of funds to gain access to established (and often access-constrained) venture funds, while also making ad-hoc investments based on recommendations by friends and other family offices, and finally invest directly into venture funds and startups.
“With so many exciting and potentially transformative technological innovations occurring – in blockchain, AI, machine learning, the Internet of Things, and so on – it is quite understandable that venture investment continues to set records around the world,” said Dominic Samuleson, CEO of Campden Wealth. “Family offices are becoming increasingly sophisticated VC investors – developing their networks and building in-house expertise – and their VC investments are growing, quickly. I am delighted that we have been able to, once again, collect this highly scarce information from our global network of experienced families to support newer entrants.”
Following are the key findings from SVB Capital and Campden Wealth’s global report, which surveyed 139 representatives of ultra-high net worth (UHNW) families and family offices with experience in innovation and venture capital investing between June and September 2021. Participants represented family offices in offices in North America, Europe, Asia-Pacific, Latin America and the Middle East. In addition to the survey, in-depth follow on interviews were conducted with 10 family office representatives. The responding single-family offices had an average of $989 million assets under management (AUM) and the responding multi-family offices had an average of $1.9 billion AUM. The full report is available at https://www.fa-mag.com/news/family-offices-raise-bets-on-start-ups-in–418-billion-market-64301.html.
Family offices progress through a similar path in their venture capital investing journey
Although every family office is unique, their venture investing journeys are similar. Most start investing in fund of funds, then venture funds, and finally directly into startups.
Family office participation in venture continues to increase
Startups are increasingly open to direct investments from family offices, alongside venture funds. Family offices, in turn, are investing strategic capital, adding value based on their operating businesses and network connections. The average family office venture portfolio comprises 17 direct investments and 10 fund investments, and within the next 24 months, family offices expect to make 18 new investments.
Sixty-seven percent of family offices rely on their existing network for deal flow
The best venture deals continue to be hard to access. Most family offices rely on their existing networks, GPs of venture funds, founders, and other family offices for deal flow. Only 1% currently use digital platforms, such as SVB LIFT.
Family offices are focused on growth and cross-sector
Investments tend to be focused on growth investments, representing 48% of the venture portfolio, followed by 28% in pre-seed and seed investments and 24% in Series A investments.
18% of FOs have venture investments in Life Sciences, e.g., biopharma, drug discovery, medical devices, diagnostics, etc. Energy & Resource Innovation, including climate and sustainability, is an increasing area of focus.
Family office staff and VC teams are growing, but top talent is in short supply
Today the average family office staff consists of 15 members, including two VC investment professionals, with plans to bring in one additional investment specialist within the next five years. However, talent remains scarce and competition is fierce for top talent.