One of the most notable changes in investing in recent years has been the rise of family offices, which are family-run businesses that manage the financial affairs of a wealthy family, including financial, legal, and tax services. In the past, only the very wealthiest families set up a family office, but today more families than ever are interested in managing their wealth and the number of family offices has grown significantly.
Interestingly, family offices are increasingly playing a role in the startup ecosystem. In the past, family offices tended to invest only in later-stage companies that were already well-established. But more and more, family offices are getting involved in seed and early-stage investing. There are a few key trends driving this change. First, there’s been a global increase in the amount of money being invested in seed rounds. Second, the average size of seed rounds has also been on the rise.
So, what does this all mean for startups? If you’re seeking investors, family offices should be on your radar. They can provide the necessary funding to help you get started, and they often have a lot of experience and expertise to offer as well. Family offices can play a key role in the early stages of a company’s development, and they are often willing to provide more flexible terms and conditions than traditional venture capitalists. This can be extremely helpful for startups that are looking to get their business off the ground.
Family offices have been involved in several high-profile seed deals in past years. For example, in 2016, family office investors participated in a $15 million seed round for the online lending platform SoFi. In 2015, a family office was one of the lead investors in a $7 million seed round for the mobile payment startup Square.
Flash forward to 2022 and it’s evident that family offices are more interested in seed-stage startup investment deals than ever before!
A recent article in Crunchbase reported that “while we might think of a typical investment as a couple million dollars, round sizes classified as seed range from tens of thousands to hundreds of millions. That said, the rise of big seed rounds is mostly a recent phenomenon. Numbers have grown particularly sharply in the past couple of years, coinciding with a sharp increase in overall venture investment.
“The major driver has been more and more capital coming to seed stage,” said Eugene Zhang, founding partner at TSVC, a Silicon Valley-based firm that’s been making seed investments for the past 11 years. Over that time, valuations have grown several-fold, meaning it simply costs more for a significant stake in a promising startup, he told Crunchbase.
Crunchbase analyzed the rise of so-called supergiant seed rounds—investments of $10 million and up—over the past eight years and found that these rounds are clearly on the rise in the U.S., with 2022 trending higher even amid a pullback in overall venture investment. This trend is likely since more and more family offices are willing to invest larger sums of money in startups, and it is expected to continue.
Series A funding is typically used to finance a startup’s growth and expansion. This type of funding is typically more substantial than seed funding, and it often comes from venture capitalists or other institutional investors. Series A funding can differ from seed funding in a few key ways. First, the amount of money that is typically invested in a Series A round is much higher than in a seed round. Second, the investors in a Series A round are typically more experienced and sophisticated than those in a seed round. And finally, the terms of a Series A investment are often more favorable to the startup than the terms of seed investment.
Keep an eye out for these three trends when it comes to family office investing in startups – more money being invested in seed rounds and larger average seed round sizes. Family offices can be a great source of funding and support for your startup, so don’t hesitate to reach out to them.
As technology continues to evolve, the way we live our lives changes with it – sometimes in very big ways. The way we work, the way we communicate, and even the way we connect with loved ones are all transformed by tech advances. And as our lives change, so too does the way we invest our money.
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