Family Office And New Investments: What Does The Future Look Like? India is a land dominated by family businesses, but how can family businesses be run as business families?
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India is a land dominated by family businesses, but how can family businesses be run as business families? While one arm is responsible for making income the other is all about creating wealth for your business. During the Entrepreneur India Summit, one of the panel discussions moderated by Editor-in-chief Ritu Marya was 'Family Office & New Investments'. The panellists spoke about different issues such as emerging investment paradigms in family offices for long-term investments, strategic insights to deploy capital for family offices and the risks and opportunities associated with start-up investments.
Here are the four panellists along with some of the issues that they helped to highlight:
1. Gaurav Gulati, Founder and MD, Aroa Venture Partners
The future of the family office structure
Over the last few years angel investing has become quite fashionable, but I think it's a serious approach that one should take. As family offices are evaluating this, it's an honest conversation that the family needs to have and understand how committed they are to making this alternative investment. It's about their allocation strategy because running an arm to evaluate opportunities and take them to a successful exit requires a lot of time and effort. Basically, the question that our family office should ask is how committed are you, how many resources can you actually allocate to that and based on that take a call whether you want to do it directly or perhaps take a fund to fund approach.
2. Brijesh Damodaran, Co-founder and Chief Investment Officer, Auxano Capital
The change in family offices' approach to investments in startups
There is no one right approach. It all depends upon how the family office is structured, what they are looking at and how within the family office seeding of control is given to the younger generation. Also, for promoters are looking at new capital, family offices is can be a very good option because you need patient capital. That is where family offices can actually be a play play important role into the whole ecosystem of what we are going through currently. So I'll summarize as saying you know you have to find what is good for you and see how it can evolve and move forward.
3. Amit Ranade, Head of Investment, Cataraman
The question of patience capital
Patient capital doesn't mean it doesn't need to compound, that needs to be clarified. But having a family office as an investor on your cap table for budding entrepreneurs gives you flexibility from a capital perspective, and also in getting help from the family office as well. And this could be because the entrepreneur on the family office side has experience of scaling businesses. We can help the budding startups from a GTM perspective, we can help them on the governance framework perspective. So there are multiple elements that a family office team can provide coming onto the cap table for an entrepreneur.
4. Ankit Kedia, Founder and Lead Investor, Capital A
Weighing the investments made
Let me try and flip the narrative. A family office will always have something called IPS or an investment policy statement where they decide what is going to be their allocation toward debt and equity or what will be their allocation toward private market investments. Most of the time, there are wealth managers involved who always try and push you towards a certain agenda.
Now for example, IAFL, Edelweiss or Kotak are some of the names that have been around in the market for quite some time and their advice to you always would be to have most of the income focused on public markets. 80% to 85% of your investments have predictability and the family office is still very conservative on the private side of things.