With more global and domestic investors investing in Indian startups, the investments from family offices have become mostly indirect through the venture capitalists or private equities. In an attempt to set the record straight, a consortium of family offices is working to enhance the intricacies of the investments.
The proposed consortium is reportedly led by Waterfield Advisors Pvt. Ltd, a multi-family office and advisory firm started in 2011 by Soumya Rajan. The proposed ‘Family Office Consortium’ is being seen an attempt to break free from the lack of consistent returns and high management fees in private equity and venture capital funds.
Rajan told Livemint that the intention of the consortium is to encourage deal flow and participation. To begin with, 20 active family offices are discussing the best manner of collaboration. Further, these family offices will each act as an “investment manager” for the deals that they are leading. Waterfield Advisors is expected to facilitate the sharing and exchange of information between participating families.
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Rajan said that the aim is to create a structured environment to encourage deal flow at a national level, undertake due diligence and tap into the domain expertise of the participating families.
The consortium will look at deals across sectors and investment size. Rajan said, “Initially Indian families started to better understand the alternative investment space by investing in PE and VC funds, the experience was very varied, with returns through funds being largely inconsistent and fund management fees being fairly high.”
This move has led family offices to consider taking direct stakes in companies where the family could exercise greater control over their investments.
Family offices have been at the bottom of the pyramid to invest in PE and VC funds and, in turn, have been the first fundraising opportunity for startups. According to ultra high networth individual (HNI) and family office membership network Campden’s Family Wealth Report 2018, direct investments account for 14% of the average family office portfolio allocation globally.
In India, 12% are the direct investments. Some renowned family offices that are active in direct investing include Azim Premji’s PremjiInvest, Narayana Murthy’s Catamaran Ventures and Pawan Munjal’s family office.
As the family offices follow a route of the consortium along the lines of angel list syndicates or angel networks, direct investment of family offices may be a different growth opportunity for startups as well as these family offices.