Earlier this month, Family Capital ran an article about how the booming startup sector in India is fueling the growth of family offices. Well, there appears to be growing relationship developing between family offices and startups in other parts of the world as well.
This is being led by an increasing number of startups seeking money from family offices before other sources like venture capital firms, and a growing willingness for family offices to finance them.
An interesting example of this relationship was discussed by Tyler Jacks, one of America’s top cancer specialists, who has recently launched a startup called Dragonfly Therapeutics. Jacks told the high-tech publication Xeconomy that he secured finance for Dragonfly from family offices. Jacks added that family offices were quicker to commit than venture capital firms. VC firms typically insist on a series of funding rounds, and this can lead to tension and different incentives for different investors in a syndicate, said the article.
He added that family offices didn’t place that sort of pressure on Dragonfly, and the startup could return to them for more support when needed. One of those family offices supporting Dragonfly is linked to Tim Disney, the great-nephew of Walt Disney, said the article.
Family Capital reckons this more informal approach from family offices when backing startups is endearing the sector more to family investment opportunities, and this will only increase as time goes on. On the other side of the deal, family offices are hungry for direct deals like backing startups more than ever, particularly in a low yield environment for most indirect investments.
Here’s another deal in the last week of a family office backing a startup. Bunting Family Office, set up by the Bunting family who made their money from the sale of Noxell Corporation to Procter & Gamble in the late 1980s, recently backed a Baltimore-based startup called Pixelligent Technologies.
Despite the risks of backing startups, expect many more family offices providing finance - and very willing startups.