Family offices' startup bets are changing
Funding by the ultra-rich had peaked in 2021
Family offices in India may be headed for their least active year, after investing billions of dollars in startups during the pandemic.
They have deployed around $200 million in 2024, according to a Business Standard analysis of data as of the third week of June from tracker Tracxn. The peak of such investments, $7.8 billion, was during the pandemic year of 2021. The last full-year figure, of $0.8 billion in 2023, represents a decline of nearly 90 per cent from the peak for single family office startup funding. Overall funding for startups (by all investors, not just family offices) has fallen less than 60 per cent.
Single family offices (SFO) – trusts, or holding-cum-investment companies – provide a range of services to a single wealthy family or individual, including wealth management, tax planning, lifestyle management and overseeing ownership in family businesses. SFOs can also function as investment vehicles. There are 201 single family offices in India that fund startups. Single family office funding in 2023 hit a lower value than in 2019 (chart 1, click image for interactive link).
Consumer, retail and transportation and logistics technology startups have been the largest beneficiaries of the billions that family offices invest. All have seen sharp cuts since 2021 (charts 2).
Most of India’s richest families live in Mumbai, Delhi, Chennai and Bengaluru. At their peak, they largely invested in startups in their neighbourhoods, with 98.4 per cent of capital going to metro-based startups. Subsequent funding appears to be trickling to smaller cities like Pune, Belgaum and Ahmedabad. Smaller cities accounted for a greater share than before of startup funding by family offices in 2023 and 2024 (chart 3).
Another change in tactics is the funding stage at which family offices are willing to come in. Only 3.4 per cent of funding went to companies from seed to series A, series B and series C funding stages in 2021. It rose to 83.5 per cent in 2024.