Startups are companies at the very earliest stages of development, where there’s the highest potential for growth. While some investors are wary, family office startup investments offer you a way to get in early on a company poised for exponential growth.
According to research by PitchBook, venture capital investments in US startups and early-stage companies totaled $330 billion in 2021, more than double the amount seen in 2020. You can take advantage of this major trend in venture capital investments through your family office.
Family Offices Investing in Startups Are on the Rise
While some people might associate family office investing with more conservative wealth management strategies, family offices, in fact, offer investment opportunities across an incredibly broad spectrum. Startups in tech and other industries are among the fastest-growing areas of investment for family offices.
According to research by Camden Wealth, 64% of family offices currently invest in biotech, 61% in fintech, and 49% in artificial intelligence. These are sectors that are exploring completely new technologies, so investments in early-stage startups could lead to major returns down the line. You might be investing in the early days of a company that will grow to dominate its market in the future.
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With the right family office investment strategy, you can take advantage of rapidly advancing technology and the startups that drive it. There are entirely new sectors emerging, presenting investors with incredible opportunities.
Investments in Startups Provide Excellent ROI
When you invest in a startup, you’re investing before the company has become publicly listed and potentially before it has fully established itself. This can carry more risk than your standard blue chip options, but you’re also entering at the optimal time to take advantage of long-term growth. The company will still have a low valuation, letting you obtain a higher stake for a lower investment.
Individuals who provide you with family office services can help guide your investment strategy, and that strategy could include investing in startups. Depending on your individual situation, investing in startups could prove to be a lucrative option.
While this is the riskiest stage to invest in, research by Crunchbase shows that the number of startups receiving seed investments has risen to more than 20,000. As the startup continues to grow, it builds confidence and solid financial data. This provides greater security, but these companies will carry higher valuations that require larger investments to acquire the same stake.
Credit: Louis Reed
With a family office, you can carefully balance all of your investments. There are many ambitious emerging Silicon Valley startups in their earliest stages, along with more established startups. Of course, startup investing plays just one part in your overall investment strategy.
Investing in Exciting New Technologies
When determining how to invest your family wealth, ROI isn’t the only factor to take into account. There’s also the real impact that your investments have on the world, and there’s nowhere that this impact is more significant than in startups.
By investing in startups, you can help foster innovation across a wide range of fields. If you have some particular passion, whether for renewable energies, healthcare, or other areas of innovation, you can use your investment strategy to contribute. Startups with promising ideas emerge every day across the country, and you can play an important role in helping them realize the difference their ideas will make in the world.
How Are Family Offices Investing in Startups?
There are many different ways that individuals, families, and businesses can invest in technology and other flourishing sectors. You can invest in established companies operating in these spaces. However, you can work with a family office to access a wider range of investment opportunities, such as investing in startups.
One of the ways that you might invest in startups is by investing in VC funds. These large funds are established by venture capital firms such as SVB Capital, Accel Partners, and Avanta Ventures. They pool assets from many investors and identify and invest in promising startups. Family offices investing in venture capital are becoming increasingly common.
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These VC-invested funds depart from some of the conventional ways that family offices have managed investments. Family offices private equity investments have been more common in the past, targeting more mature businesses rather than startups. However, as the startup space has grown, so has PE investment in startups.
There is also the option of making startup deals with individual startups directly. However, finding and orchestrating these deals can be a complex and time-consuming undertaking. Family office services can take these tasks off your hands, presenting you with analysis of your options and executing your investment decisions.
Build Wealth With Family Office Startup Investments
Family office investors can achieve exceptional ROI and invest in exciting new technologies by investing in ambitious startups. Family office services from the team at Sharp Financial Group can support your startup investment strategies with private equity and venture capital consulting.
Our team of CPAs and financial advisors can help you develop the appropriate investment strategy for your goals, along with tax optimization strategies and more, to ensure that you get the most from your investments. Contact us today to speak with an expert about family office startup investment opportunities.
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**The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
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