Family Office

EXCLUSIVE: Single Family Offices Didn’t Slash VC Allocation In 2023

Alastair Graham 11 January 2024

EXCLUSIVE: Single Family Offices Didn’t Slash VC Allocation In 2023

The founder of the Highworth Research database rebuts the idea that single-family offices have retreated from venture capital in the face of more challenging economic conditions.

(This news service carries the following commentary from Alastair Graham, director, family office research, at Highworth Research, a business that he founded. The firm has an extensive database on the actions of single-family offices around the world. This news service is its exclusive media partner. To register for its database, click here.)

On 5 January the Financial Times reported that fundraising by US venture capital firms in 2023 had sunk to a six-year low. The reasons are widely understood. 

But the gloom can be overdone. One aspect of the problem facing early-stage growth companies is that many are conditioned primarily to solicit funding from venture capital companies and do not look at the wider market for raising risk capital. Within that wider market single-family offices form an important source. 

The problem, however, is that family offices are much harder to identify. As a group they are opaque, only dimly visible, and typically do not form a cohesive, easily accessible market such as VC funds, pension funds, endowments, and other sources of institutional or private capital.

Why single-family offices are a strong VC fundraising source
Yet the journey to family office funding is worth making for many young companies with promising growth prospects. There are good reasons for this, including:

-- There is wide availability of VC funding from single family offices, which is not significantly retreating in the face of economic headwinds; 
-- Family offices are not themselves dependent on external funding, their capital is typically evergreen; 
-- Single family offices as a sector have continued to grow rapidly in numbers over the past 15 years; 
-- Family office VC funding generally represents patient capital, a willingness to invest for the longer term; 
-- Many single-family office principals like to invest in business sectors which they themselves know well and often where they have made their own fortunes. The quality of management support for the startup may be strong in terms of recommended business models, market entry processes, growth strategies, useful contacts, and errors to avoid; and 
-- Venture capital investment is among the most popular asset classes to which family offices allocate their capital. 

The Highworth Database shows that 61 per cent of single-family offices globally, or 1,546 out of 2,516 on the database, invest in venture capital. That’s 2 per cent more than when Highworth last analysed family offices for their VC allocation only eight months ago. 

Venture capital is the fourth most popular asset class to which family offices allocate capital, after equities (74 per cent of family offices), real estate (66 per cent), and private equity (62 per cent). 

However, the opportunities for fundraising from single family offices vary depending on the region. The table below shows that the chances of an early-stage company raising capital from a single-family office in North America are far higher than in Europe:

Moreover, in the case of Europe, Middle East and Africa, and Asia-Pacific, the percentage of family offices investing in VC has actually grown 2 per cent over the past eight months, and in North America by 1 per cent. In a period in which the economic headwinds have been so strong, these numbers certainly don’t show a retreat from VC funding but demonstrate the resilience of single-family offices as a VC fundraising source.

A straightforward professional solution for fundraising from family offices is to use the Highworth Single Family Office Database. This well-established online database provides detailed profiles, including contacts at over 2,500 single family offices globally, and identifies which ones invest in venture capital either directly or through third-party funds or both. What’s more, the database shows the business sectors in which each family office in each of over 70 countries prefers to make its VC investments.

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