Family Capital has been documenting for some time the increasing volume and value of direct investing being done by family offices in the last 10 years. Much of that investment has gone into mid-market private equity deals, but an increasing amount has also been allocated to direct venture investing. And now there’s some convincing evidence to show just how much direct venture investing from family offices has risen in recent years.
According to the analysis by Crunchbase News, family investment groups worldwide invested in 354 startups directly in 2015, which compares with just 59 in 2010. OK, that growth rate has fallen off in the last two years, which Crunchbase reckons is a reflection of overall market trends in venture investing, with investors favouring bigger deals with later-stage tech companies, rather than backing many smaller early-stage stage startups. So in 2017, there were 272 recorded startups invested in by family investment groups.
But perhaps the most interesting point from the Crunchbase analysis is that family office investment in startups is outpacing institutional investment. By indexing reported deal volume of family offices and institutional investors, the Crunchbase analysis was able to compare the growth rate between the two.
Their analysis found that in 2015, reported deal volume from VC firms was 2.5x that of the 2010’s total, but the multiple for family offices is around 6x. And the analysis shows that family office deal volume growth outperformed traditional VC investment pretty much for every year from 2010 up to the end of 2017.
If anything, the Crunchbase analysis, as they admit, probably underestimates the amount of family office direct investing going in venture. Venture investing is often under-reported, especially in Europe, compared with the US, and many family offices prefer to keep their investments private. And, of course, the data doesn’t record the amount of family office money going into venture funds.