Five trends in family office investments in startups

PwC’s latest annual Global Family Office Deals Study highlights 5 key trends in family offices’ startup investments.

Family offices are major players in funding innovation, being responsible for 31% of investments in startups, and with 83% of those executed as club-deals. Generative AI (GenAI) is one of the fastest growing and most popular areas for family office investments in startups. Based on the latest research findings, these 5 trends are detailed below.

After reaching an all-time high in the second half of 2021, both the volume and the value of family office investments in startups have fallen significantly, with deal value slumping by over 71%. However, the rate of decline in both volume and value has slowed sharply, with deal volume remaining at almost the same level over the past two half-year periods. So it appears that the fall seen in recent years may be reaching a plateau.

Global family office investments in startups by volume and value, January 2014 to June 2024

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…with exits from startups also falling back after a high point in 2021

The value of family office exits from startup investments reached an all-time high in the first half of 2021. But it then plunged by 78% over the following two years, before recovering slightly only to decline again in the first half of 2024. By contrast, the deal volume of family office exits from start-ups has remained at a fairly consistent level since early 2022, holding firm in early 2024 even as the aggregate value of exits fell back.

Exits from startups by family offices globally by volume and value, January 2014 to June 2024 

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While the number of startup investments by family offices has fallen marginally in the past two half-year periods, the average cheque size handed over to startups has increased significantly, marking a rebound that started in the first half of 2023. As a result, the average “ticket size” for startup investments in the first half of 2024 was 23% higher than in both late 2022 and early 2023.

Median deal size and volume of family office startup deals globally by volume and value, January 2014 to June 2024

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An analysis of family offices’ startup investments by sector over the past year reveals that software-as-a-service (SaaS) and artificial intelligence and machine learning (AI & ML) were the industry verticals in which family offices invested the most often, and also the most value, worldwide. These sectors were followed by FinTech and life sciences in terms of both deal volume and value. 

Vertical sector breakdown of family offices’ startup investment by volume and value, July 2023 to June 2024

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The proportion of family offices’ startup investments going to the United States was generally in decline over the period from 2014 up to the beginning of 2023, when it slipped to a decade-long low of 46%. However, since that point the US’s share has begun rising again, accounting for 50% of start-up investments in early 2024. While one in every two family office startups investments are currently in the US, only just over one in four are in Europe.

Breakdown of family offices’ startup investment by region, January 2014 to June 2024 

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…while the US is also by far the leading country for family offices’ startup deals

Over the year from July 2023 to June 2024, an analysis of family offices’ investments in startups by country confirms that the US is the leading country by a wide margin both in terms of deal volume and deal value. The UK ranks second on both measures, while India is third in terms of deal volume and France third on deal value.

Breakdown of family offices’ startup investment by country, July 2023 to June 2024

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Family offices’ preference for “club deals” is especially strong in startup investments – a finding that’s hardly surprising given the relatively high levels of risk involved in investing in this asset class. “Club deals” were at their lowest level in the decade at the beginning of 2014 and their highest at the end of 2021. In the first half of 2024, the proportion of "club deals" in family offices startup investments edged up by 2 percentage points from late 2023, to 83%.

Breakdown of family offices’ startup investments globally by volume between ‘sole deals’ versus ‘club deals’, January 2014 to June 2024 

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All of this can - in our opinion - be attributed to the emerging "NextGen effect". The next generation is significantly altering family office investment strategies with their deep understanding of new technologies, which fuels a surge in startup investments. Their cautious approach to risk favours smaller, more manageable transactions and the rise of "club deals." Additionally, their commitment to sustainability is evident in the growing focus on impact investments. These trends collectively highlight a shift in investment paradigms, emphasizing the next generation's influential role in steering family businesses toward a more innovative, collaborative, and sustainable future.