Family Offices Bet Big on India's Growth-Stage Start-ups

Family offices have gained prominence in India lately, thanks to the increasing number of ultra-high-net-worth individuals (UHNIs). In 2023, India was home to more than 13,000 UHNIs, individuals who own assets worth over 30 million US dollars. This surge led to a sixfold increase in the number of family offices --- from just 45 in 2018 to over 300 in 2024.

Going beyond their primary role of weath manegement, these entities also allocate a portion of UHNIs’ capital to the Indian start-up ecosystem. In short, they bring patient capital to new age businesses and bridge the gap between entrepreneurial ambition and financial backing. To note, family offices accounted for $9.6 billion of the $23.7 billion VC investments in Indian start-ups in 2022.

“They bring more than just financial capital to start-ups. They also provide ‘relationship capital’ and ‘expertise capital’ which allow the families to open a lot of doors for the founders who can benefit from the huge experience of family businesses or serial entrepreneurs. In many cases, family offices help the founders in areas like operations, people management, logistics, etc.,” Munish Randev, founder and CEO of Cervin Family Office told Outlook Business.

Besides this, family office are also positioned to unlock domestic capital for start-ups. They are filling the funding gaps, which majorly comes from overseas investors, with their deep market knowledge and financial resources. Reportedly, nearly 15 per cent of the capital invested in Indian start-ups came from domestic sources in 2023, and the rest came from foreign investors.

"With a proper structure and inhouse or externally advised Investment committees, these entities will surely unlock a lot of capital which will find its way into Indian start-ups," Randev noted.

On the other hand, Waterfield Advisors MD Sahil Grover emphasised that the government has introduced many schemes to support startups and remains committed to promoting the ecosystem, their role is systematic and structured, with their share of capital expected to continue growing, making UHNIs significant participants in the country’s entrepreneurial story.

"Family offices provide patient capital, mentorship, and strategic guidance. Their investments often extend beyond financial support, offering startups access to extensive networks and industry expertise," he said.

Read More | Invest4Edu Bags $3 Million in Seed Funding From Family Offices

The AI Opportunity

The strong performance of Indian stock market prompted many family offices to recalibrate their portfolios, redirecting funds from start-ups to listed equities. Benchmark indices Nifty50 and Sensex rose 25-30 per cent in a year, making listed equities an attractive option for investors.

However, this shift is seen as cyclical rather than indicative of waning interest in start-ups. Family offices continue to back high-growth sectors, particularly those aligned with their expertise and impact objectives. "This recalibration reflects strategic decision-making rather than a loss of faith in India’s start-up story," he explained.

To provide sector-specific insights, the Waterfield Advisors MD believes that the multifaceted approach has made family offices indispensable players in various sectors like technology, sustainability, and fintech. Of these, AI stands out as a key area of interest.

He further cited an example of Qure.ai, a healthtech startup leveraging AI, raising $40 million last year, in which family offices significantly supported the funding. Sustainability-focused ventures and wealth tech platforms like Centricity and Dezerv have also attracted strong investments.

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Echoing similar sentiments, Randev said, "Family offices invest in a diversity of sectors, but it may also depend upon the plan that each family office has for their VC allocation. As per trends, they often focus on consumer-related spaces, manufacturing, healthcare, fintech, deep tech, spacetech, etc."

However, family offices must balance patience with a proactive approach to ensure continuous growth in fields like AI because the tech landscape evolves daily, he added.

Challenges Loom

Investment requires a deep understanding of business models, market dynamics, and management teams, all while keeping up with the fast evolving nature of the start-up ecosystem. The due diligence process is all the more intricate given the fact that start-ups often operate in uncharted territory.

Grover said India lacks a ‘one-stop shop’ to access top-tier PE and VC managers. And given top quartile funds are usually oversubscribed by returning institutional LPs, the selection of fund managers becomes more difficult.

"On the risk part, one should have a clear understanding of the nature of the asset class and also the ‘type’ of risk associated. Additionally, we also have to have a diversified portfolio so as to spread the risk out," said Randev.

Speaking about exit strategies, industry players are hopeful of exits in the growth stages or post-IPO level. They believe startups that are strongly moving towards profitability will see their valuations expand faster, but sometime the valuations of listed matured businesses will start effecting the valuations of newly listed start-ups of the same industry.

"For how long will the listed startups continue to burn capital without stable profitability? Once the earnings grow the valuation multiple will tend to move lower, even though the stare prices may remain buoyant," said Randev.

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Grover stated that family offices often sell their shares gradually rather than through a single transaction which allows them to capitalise on favourable market conditions while minimising the impact of volatility on their investment portfolios.

"After realising profits from an IPO, they typically reinvest in diverse ventures or asset classes, such as private equity, to reduce risk from concentrating on one asset. Post IPO, family offices must navigate lock in periods that restrict share sale," he said.

In a nutshell, it can be said that family offices in India are no longer silent custodians of wealth; they are active architects of the country’s entrepreneurial future. Invest4Edu, an education planning, saving and investment services platform, has earlier raised $3 million in seed funding from family offices.