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Our first global analysis of family offices’ investments in startups reveals a worldwide community of family-backed investors at a defining moment in their development, as their role, purpose and scope continue to evolve. In fact, the sheer scale and pace of this evolution mean that opinions now vary about what a “family office” actually is.
Historically, academics divided family offices into four groupings: single, multi, embedded and virtual. But practitioners in the sector now identify numerous other variants – including principal investment offices, principal investment funds, family business corporate ventures, and family investment companies. The common thread? All were founded with the money of a single owner or family of owners – and all invest their money specifically for the long term.
In this analysis, we’ve combined our unique proprietary database of 6,530 family offices worldwide. In compiling this report, we researched investments in startups undertaken by family offices between January 2012 and December 2022, supplementing the resulting insights with information from a variety of third-party sources, including professional venture capital databases, global news monitoring and search engines, as well as industry reports and other publicly available sources. We believe the resulting report is required reading for anyone with an interest in family offices – as well as in how investment in startups is shaping the future for all of us.
Passing the peak: Family office-backed startup deals leapt in 2021 – and slumped in 2022
Having followed a generally rising trend since 2012 culminating in a strong surge in 2021, family offices’ investments in startups declined sharply in 2022 for the first time in 11 years, falling both in terms of deal count and capital invested.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
In 2021 the volume and value of family office investments in startups leapt to their highest levels in the past decade. However that peak in deal-making has now passed. In 2022, the total capital invested by family offices in startups plunged by almost 45% percent year-on-year to US$161.7 billion, while the number of investments fell by more than 22% to 4,736.
At the same time, family offices appear to be maintaining a more risk-averse approach towards investing in startups. While they invested predominantly in early-stage startups until 2018, their focus has shifted to later-stage investments from 2019 onwards – a trend that continued in 2022
Heavy hitters: Family offices are massive investors in startups
Almost one-third of the total capital invested in startups worldwide in 2022 came from family offices.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
Family offices are major players in the global market for investment in startups. Overall, family office-backed deals represented a total of 10.1% of all investments in startups worldwide in 2022. Even more remarkably, fully 32.5 percent of all capital invested in startups in the same year was contributed by family offices.
Joint efforts: “Club deals” continue to dominate
In recent years, around nine in every ten family office-backed investments in startups have been “club deals”.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
With the exception of a brief dip in 2016, the share of family office startup investments conducted as “club deals” – undertaken jointly with other investors – rose steadily through the decade to 2021. In that year the proportion of “club deals” went above 90% for the first time, reaching 92% of all family office-backed investments in startups worldwide. However in 2022 the share of club deals slipped back to its level in 2020, at 89%.
The regional view: The Americas and Caribbean remain the most attractive
Among the three principal regions globally, family offices’ top target market for startup investments is still the Americas & Caribbean.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
A breakdown of family office investments in startups by deal location shows that the Americas, Latin America & the Caribbean remained the largest target market in 2022, despite the region seeing a year-on-year decline in deal volume of 23.8% from 2021. By comparison, the number of deals in Asia Pacific fell slightly faster, with a decline of 25.9% from their 2021 level, while the smallest decline in investments was seen in Europe, Middle East & Africa region, down by 16.2%.
Reining in: Deal sizes fall back
In terms of median investment size, the checks written by family offices became significantly smaller in 2022 for the first time in years.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
In 2021, the median amount invested in each startup by family offices transacting a deal was US$11.3 million, meaning at least 50% of startups received a check above this size. This figure represented a significant increase of 41% from 2020, and was by far the highest in the past decade.
However the 2021 figure represented a peak – and in 2022 the median deal size slipped back again by just over 10% to US$10.1 million. A breakdown by region shows that the median amount invested fell in all regions in 2022 except the Middle East & Africa. However, despite the general decline, the median deal size globally remains 2.5 times larger than it was in 2013.
Top countries by deal volume: The US leads the way
The ranking of the top ten countries for family office-backed startup investments by deal count is topped by the US by a wide margin.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
In terms of deal numbers, the top five target countries for family-office-backed investments in startups in 2022 were the US, India, the UK, Germany and France in that order. Interestingly, this ranking differs from the top five for overall investments in startups by all types of investors, which is the US, China, the UK, India and Canada.
Perhaps the most interesting differences are, firstly, family offices’ strong focus on India, which ranks second after the US – reflecting India’s large number of attractive tech-driven startups; and, secondly, the fact that China doesn’t even make the top five markets for family offices’ startup investments, possibly due to higher perceived risks and the effect of continued COVID-19 lockdowns in 2022.
Top countries by deal value: The US dominates once again
The US also leads the ranking of the top ten countries for family office-backed startup investments by capital invested.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
In terms of aggregate capital invested in startups by family offices in 2022, the top five target countries were the US, the UK, India, Germany and France. While the UK had fewer deals than India, it surpassed India in overall deal value owing to a higher average investment size.
In contrast, the top five target countries by capital invested in startups by all types of investors in 2022 were the US, China, the UK, India and Germany. As with the ranking by deal volume, the absence of China from family offices’ top five target locations for startup investments appears to indicate a desire to avoid higher perceived risks.
Target verticals: family offices mirror the wider market on deal count
In terms of the number of startup investments in key vertical industries, family offices are very much in line with sector trends in the overall deal flow.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
A breakdown of startup investments by target vertical industry reveals that there is hardly any difference between the sector focus of family offices and the overall market. The top five verticals for family office (FO)-backed investments in startups by deal count in 2022 were Software-as-a-Service (SaaS), FinTech, Artificial Intelligence & Machine Learning (AI & ML), Technology, Media and Telecoms (TMT) and Mobile. This is almost identical to the ranking of the top five verticals for overall investments in startups by deal count in 2022, which was SaaS, AI & ML, FinTech, TMT and Mobile.
Target verticals: family offices also mirror the wider market on capital invested
A breakdown of capital invested in startups in key vertical industries shows that – as with deal count – family offices are very much in line with the overall market.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
In 2022, the top five verticals by capital invested for FO-backed investments in startups were SaaS, TMT, FinTech, Mobile and AI & ML. Again, this is almost identical to the top-five sector ranking by capital invested for startup investments overall in 2022, which was SaaS, TMT, FinTech, AI & ML and Mobile.
Family investment funds are on the rise
A ranking of the most active family offices with investments in startups by deal count in 2022 strongly underlines the growing prominence of family investment funds.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
The three family offices globally that made the highest number of investments in startups in 2022 were: Soma Capital of the US, the family investment firm of David Frayer of Frayer Enterprises; EQT of Sweden, backed by the Wallenberg family; and Global Founders Capital of Germany, backed by the Samwer brothers. All three firms invested in well over 100 startups during the year. They were followed by Bessemer Venture Partners of the US and Picus Capital of Germany in fourth and fifth place respectively – meaning the global top five includes two family offices each from the US and Germany.
The ranking underlines the ongoing reshaping of the family office landscape that we highlighted in the introduction to this report. Rather than traditional single- or multi-family offices, the upper reaches of the league table are dominated by entities such as family business corporate ventures and family investment companies. Having started life with a mandate to manage family wealth, these entities have expanded and evolved over the years into fully-fledged funds with their own distinctive investment focus and strategies.
The focus moves away from “mega-deals” towards mid-sized investments
While the number of family office mega-deal startup investments has been rising in recent years, 2022 saw the balance shift back towards medium-sized deals.
Source: PwC’s proprietary family office database, matched with Pitchbook data, as of 20 February 2023
An analysis of the size distribution of family office-backed startup deals shows that most investments backed by family offices are medium-sized deals, in the range of US$1 million to under US$10 million. The next most active category in terms of size is so-called mega-deals of the order of US$25 million and above.
In recent years, the gap between the number of medium-sized deals and mega-deals has been steadily narrowing. However in 2022 the differential widened again, as higher aversion to risk saw family offices’ focus shifted away from mega-deals and back towards investments further down the size range, especially medium-sized deals.
© 2023 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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