With Sticky & Patient Capital, Family Offices Trade Up As Startup Co-Investors

Startup investments might have fallen in 2026 owing to extreme uncertainty but that&#039;s not pulling back the enthusiasm of family offices. In January 2026, Easy Home Finance secured $30 million, and it saw family office Claypond Capital taking part in the deal. Moreover, the Ranjan Pai-backed Claypond Capital is also known to be in talks to invest in a dosa chain Benne.&amp;nbsp;Zepto&#039;s $300 million fundraise in 2026 also seems to have multiple single family offices zoom in to investment. This is after the quick commerce company saw family offices like B2V Ventures, J&amp;amp;A Partners, Kalyan Family Office participating in its 2024 mega fundraise of $350 million.&amp;nbsp;Family offices who have been investing in startups via alternate investment funds (AIFs) for a while; and have now traded up to become co-investors in funding deals. As of 2025, family offices secured as much as 10% share - the highest ever share since 2021 in total venture capital deals, turning into a major participant in the startup ecosystem.&amp;nbsp;&quot;A lot of family offices are operating businesses, many of whom have seen exits via IPOs and offers for sale. They have realized money through the process and understand value creation. Also, they have been participating through AIFs and have a sense of how they work and analyse transactions. So they have taken up the reins to do it themselves,&quot; Rahul Bhutoria, director and founder, Valtrust, which offers asset management solutions.With co-investments, family offices also have more control over their investments. &quot;When family offices invest into a VC fund, the fund decides what their final allocation is into a fund. The family does not have a say in it, except in their IC vote&quot; explains Pradyumnā Nag, the founder of Bangalore-based Prequate Advisory.Playing The &#039;Long&#039; GameTurning co-investor in a startup deal brings in unique advantages to both investors as well as investee companies. As a co-investor, a family office need not stick to the horizon of VC funds which have to liquidate investments beyond a certain period of time.&amp;nbsp;&quot;Family offices make for highly strategic co-investors because they are generally &#039;sticky&#039; capital. Their timelines are flexible and are willing to hold assets longer than the typical 7-10 year fund cycle, hence offering a potential exit for VC&#039;s who have to adhere to their timelines,&quot; says Rohan Paranjpey, MD &amp;amp; head of alternative investments &amp;nbsp;at Waterfield Advisors.&amp;nbsp;Patient capital also brings about many advantages to the investee company. &quot;Companies, off-late, are more comfortable with family offices as the burn strategy that VCs had, has not shown correlation to success. Most companies who believe they do not need to blitz for market share to survive and are better with a patient investment which believes in fundamentals,&quot; says Nag.Breaking The Fee-Cost BarrierBhutoria believes that being a co-investor allows a family office to cherry pick an opportunity and hold on for better returns. &quot;The cost and fee structures are also better,&quot; he adds.&amp;nbsp;As per Nag, family offices are becoming disenthused with the 2:20 model of VC/PE funds.According to the model, the fund charges a 2% management fee on assets under management annually; along with an incentive fee of 20% of profits over a threshold known as hurdle rate.&amp;nbsp;Nag adds that many VC/PE fund managers have turned to joining family offices in the recent years. &quot;Leadership in many funds does not change very often. Many yearning fund managers know that they may not become partners at their own fund. They joined family offices. This means that a family office can now have the capabilities of a VC with the added advantage of deal selection and quicker deal making and an option to double down where they understand a business&#039; structural advantage well,&quot; he says.A few family offices, which have existing exposure to a certain sector, might also provide strategic advantages. &quot;Unlike institutional investors who may purely care about financial return, family offices often bring industry-specific networks, operational expertise, and potential partnership opportunities for the startups they back,&quot; says Paranjpey.&amp;nbsp;While few family offices would seek a board seat of the investee company, most of them are &#039;more invested&#039; in a business than a traditional VC is. Being a co-investors allows them more legroom and independence while deep due diligence can be conducted by a VC partner with whom they are co-investors.&amp;nbsp;The Upper CutIn 2025, 70-75% of the deals executed by family offices were under $10 million, as per IVCA-Bain report. Experts however predict that as they gain confidence, the sizes would go up.&quot;The Indian family office ecosystem has scaled - many are now managing ₹500 crore to several thousand crores, so a few million-dollar cheque into a large round is a manageable allocation rather than a bet-the-house decision,&quot; says Bhutoria.&amp;nbsp;Many family offices are backed by billionaires and large businesses like Premji Invest backed by Azim Premji, the founder of Wipro. Sharrp Ventures is owned by Marico&#039;s Harsh Mariwala and managed by Rishabh Mariwala. The eponymous Mankind Family office belongs to the promoter family of Mankind Pharma.&amp;nbsp;Many family offices allocate across asset classes like equities, real estate etc, but have invested in the right talent. &amp;nbsp;&quot;Over time, family offices have built a set of internal capabilities like fund managers. They have built internal capability - dedicated investment teams, access to deal flow networks, and in several cases, their own operating experience in sectors gives them a genuine diligence edge,&quot; says Bhutoria.&amp;nbsp;Nag adds that many VC/PE fund managers have turned to family offices in the recent years. &quot;Many funds have a structure with partners at the top which does not change often. Many fund managers know that they can&#039;t become partners at a fund, and have joined family offices. A family office can now have the capabilities of a VC with added advantages in deal selection and deal making,&quot; he adds.&amp;nbsp;Beyond The Pre-IPO Game&amp;nbsp;Until now, there is a large section of interest in pre-IPO deals. It has become a sweet spot as they can invest into companies with earnings visibility and a path to the public market, and more importantly have demonstrated scale.&amp;nbsp;&quot;For family offices that are conservative in temperament, pre-IPO checks many boxes: asymmetric upside, lower binary risk, and a relatively clearer exit path even if the IPO gets delayed by 12-18 months. The caveat today is that the pre-IPO premium compression - where secondary valuations have gotten very close to IPO pricing - means the margin of safety is thinner than it was two or three years ago,&quot; says BhutoriaBut the traditional mindset is changing as family offices have the arsenal of experts in growth stage investing. &quot;There has traditionally been a preference for pre-IPO investments, as they were seen to offer the best of both worlds - returns of private markets with the liquidity of public markets in a very short horizon. However, the experience of FOs with pre-IPO investments has been a mixed bag, to say the least,&quot; says Paranjape.&amp;nbsp;Family offices are also bringing more variation into their startup investments. Especially those with in-house investment teams, are now looking to allocate a bulk of investments to growth stage companies with 5-7 years liquidity horizon. Armed with expertise, and depth in experience, family offices are now set to bigger risks for better returns.ALSO READ:&amp;nbsp;North Buys Bulk, South Buys New: Inside India&#039;s FMCG Divide

With Sticky & Patient Capital, Family Offices Trade Up As Startup Co-Investors

Until now, there is a large section of interest in pre-IPO deals. It has become a sweet spot as they can invest into companies with earnings visibility and a path to the public market, and more importantly have demonstrated scale.

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