Family Offices: The Emerging Gangsters In Indian Startup Ecosystem
The Indian startup ecosystem has crossed over $13.7 billion investment mark last year and with these figures, it is only expected to grow phenomenally in the coming years. The startup scene is gradually maturing and India has emerged to become the world’s 4th largest base for startups.
In recent years, there has been a tremendous increase in the number of creative startups, predominately in the technology landscape. Undoubtedly, the Indian startup ecosystem has hooked top-notch corporate and investors globally.
However, the first crunch faced by startups in India is most often the access to freeflow funding.
Until a few years back, these startups were mainly dependant on the foreign pools of capital for their seed-funding. However lately, family office investment in India has emerged to become a more sound and strategic investment option for startups. The role of Indian family offices in the country’s upcoming economic ventures, however, still needs to grow, when compared to countries like Europe, USA, and China.
The Significant Change
Earlier big corporate houses in India chose to invest large chunks of their personal wealth in conventional asset classes like real estate.
Until now, the super rich families of India simply passed on their wealth (both personal and business assets) from generation to another. The “next generation” of these families, now in the age bracket of 35- 45 have broken down this stereotype.
This current generation has finished their education abroad, possess greater awareness with increased exposure to global practices. They are therefore seeking for new and ingenious options for investing their family wealth.
The changing trend of the startup ecosystem in India has begun to attract more and more family office investment. Startups too prefer such family offices as the safer venture providers owing to their long-term investment approach, brand recognition, and global networking.
In the past few years, over 100 family office investment groups have been set up in India and made more than 288 private company investments that were worth $4.5 Bn.
Unlike angel investors who have fixed exit time-frame; family office investment groups are more willing to support promising startup companies for long-term, with few even going on to acquiring significant stakes in profitable ventures.
Having said that, raising funds from family offices can get tricky at times. Approaching the right group for your startup will not only improve your chances of getting that big fat cheque but will also help you with the relevant infrastructural support and business connects.
For eg: It may not be the best idea for a blockchain startup to raise funds from an FMCG family office investment group. Firstly, it’s unlikely that the family office will understand and trust the technology at play which in turn reduces their chances of investing in the company. Even if you end up raising money, the advantage would just get limited to monetary, while raising money from someone in the same domain/segment would also help you in getting important connects, technology, infrastructure to help you grow and scale.
Are you struggling to launch your new startup? Do you feel your startup has the potential to make it big? Is money the only hindrance between you and your success?
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Here we have compiled a list of Indian family office investment groups ready to invest their surplus wealth in innovative and promising startup ventures.
1. Aarin Capital
Aarin Capital is a co-owned family office of Manipal Education and Medical Group. It was started by Dr Ranjan Pai and Mohandas Pai and they chiefly invest in technology-driven startups.
Key Investments: Inc 42, Fab Hotels, PharmEasy, Zimmber
2. Burman Family Holdings
Founded by S.K. Burman, the Burman Family Office is the private investment body of Dabur India. It is currently investing in upcoming and growing companies under the supervision of Gaurav Burman.
Key Investments: Easypolicy
Chairman of Wipro, Azim Premji looks after his family office PremjiInvest and has invested growth capital in 14 different startup ventures so far.
Key Investments: Snapdeal, Flipkart, Lenskart.com
4. Ajay Piramal SFO
Led by its founder, the Ajay Piramal SFO is a privately managed family office of the Piramal Group & Shriram Group. Their prime area of investment includes consumer-based and technology startups.
Key Investments: Mavin
5. Catamaran Ventures
Infosys founder, Narayana Murthy oversees his family office Catamaran Ventures that invests in startups in India as well as abroad. Founded in 2010, they have funded six startups so far.
Key Investments: Yebhi, Paper Boat, LookUp, Acko
6. Artha India Ventures
Athra India Ventures (AIV) is the private family office of the K. Damani Group. The operations are looked upon by Anirudh Damani and they majorly invest in contemporary business models.
Key Investments: Coutloot, OYO Rooms
7. RNT Associates
RNT Associates is the personal family office fund of Ratan Tata that has been funding multiple start-up ventures since 2009.
Key Investments: Cardekho
8. The Three Sisters
Rana Kapoor, the CEO of the YES Bank founded The Three Sisters to manage the surplus family wealth. Their domain of interests includes agri-logistics, tourism, education and family entertainment centres.
Key Investments: Presto
9. Mahindra Partners
Mahindra Partners is the private equity fund of the Mahindra & Mahindra Group. It was initiated with an aim to nurture emergent businesses across various sectors. Mahindra Partners aims to not only offer financial support to its portfolio companies but also help them grow with their experience and mentorship.
Key Investments: ZoomCar
These were just a few names of the top-notch wealthy families of India who are emerging as the changing face of the Indian startup ecosystem. These family office investment – startup collaborations undoubtedly proved profitable for both the parties. There are several other family offices in India, who are catching up with this trend.
While the advent of family offices as prime investment bodies for these startups can lessen the dependencies on overseas money, it is ironical that the Indian private equity is levered with capital gains tax, while the foreign PE is exempted from the same. Yet, in spite of such deterrence, there has been a constant rise in the number of startup investments by the wealthy family offices in India.
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