This is How Indian UHNIs Will Drive Investments in Domestic Tech Startups
Thursday, 24 June 2021, 17:44 IST
Family offices, which were once the domain of a select few, are becoming more commonplace these days. We are seeing an increase in the number of wealthy people around the world, with age-old concerns about wealth preservation, corporate governance, and succession planning persisting.
Some of India's wealthiest families are likely to be behind the influx of capital that the country's burgeoning startup ecosystem will receive in the coming years. Indian startups are expected to raise around $100 billion in funding by 2025.
According to a report, titled 'Turning Ideas to Gold,' by Networks and Praxis Global Alliance, high-net-worth individuals are expected to invest $30 billion in Indian tech startups by 2025. By then India could add 95 new tech unicorns to its 56-strong unicorn pool.
Ultra high net worth individuals in India those with a net worth of more than $30 million are increasingly establishing family offices to preserve and manage their wealth. In the last five years, family offices have increased their investments in startups. However, it is still in its early stages, with most such family offices preferring to keep the majority of their money in traditional asset classes such as stocks, real estate, and gold.
By 2025, approximately 190 'Soonicorns' are expected to become unicorns. Currently, India has 56 unicorns (companies valued at $1 billion), 14 of which were added in 2021.
India is expected to have more than 10,000 ultra wealthy people by 2025. By that time, they could be worth up to $700 billion. And India's tech startup ecosystem will be an appealing playground for their funds.
Family offices are being established to provide full service private wealth management services to one or a small group of these ultra high net worth individuals. Currently, India has close to 140 family offices that cater to Indian UHNIs and invest heavily in the Indian startup ecosystem. Since 2015, they have been actively involved in more than 50 such transactions each year.
UHNIs in India for diverse backgrounds are now setting up family offices to manage and preserve their wealth.
Several business leaders in India have set up family office like Azim Premji (Wipro), Rishabh Mariwala(Marico), Ratan Rata (Tata Group), RK Damani (Damani group).
Media and sports celebrities have also set up family offices and invested in many tech startups like Yuvraj Singh (YouWeCan Ventures), Priyanka Chopra Jonas (Bumble), Akshay Kumar and Madhuri Dixit Nene (GoQii), and Sachin Tendulkar (Smarton).
Family offices set up by Indian business families based outside India(NRIs) who have made investments are Abhinav Jhunjhunwala (AJ Capital-Singapore), Satveer Singh Thankral (SGAN-Singapore), Satpal Khattar (Khattar family holdings), S. Ramakrishnan (Transworld Group Family Offices-UAE).
Even the tech and digital entrepreneurs have family offices like Aroa Ventures by Oyo's founder Ritesh Agarwal, Titan Capital by snapdeal founder KunalBahl, VSS Holdings and VSS Investco by paytm founder Vijay S Sharma, Navi by Sachin Bansal-Flipkart founder, Leo Capital by Ragul Garj Pine Labs founder.
The opportunity to leverage India's impending tech sector growth remains firmly in the private market. Over 250 private Indian technology companies with valuations greater than $100 million have the potential to go public in the medium term. The private tech market is rapidly approaching the size of the public tech market, and the private tech market is expected to outperform the public tech market soon.
The total market capitalization of public technology companies is 12.6 percent of India's GDP, while private technology companies are valued at 10.2 percent. With the right capital infusion to support tech disruption, India's tech story can mirror that of the United States.
This potential is recognized by family offices. According to 256 Networks analysis, an Indian family office's typical seven year portfolio performance allocates about 20% of their funds to alternative investments such as startups and venture capital. Nonetheless, they outperform most traditional assets in terms of returns. Alternative investments account for approximately 30% of the seven-year average return of a typical family office portfolio, ranking second only to equities. Globally, private market investments have produced 500 basis points higher returns than public market investments.
Speaking about the opportunity for Indian Family Offices investing in technology companies, Kris Gopalakrishnan, the co-founder of Infosys and promoter of Pratithi Family Office, said, “Investments in innovative startups have emerged as a lucrative alternate asset class when compared to traditional investments like equity, debt, commodities, and real estate. However, it is difficult to get exposure to high growth portfolios that use innovations to solve real challenges and build large companies in a relatively short period of time. Backing such companies requires deep expertise, strong networks, patience, and sufficient capital. Funds run by professionals provide that opportunity to Indian Family Offices and UHNIs.”
In COVID-19,Indian Tech enabled businesses outperformed traditional businesses. EdTech, online gaming, e-groceries, and healthtech companies have benefited the most from the pandemic.
Millions of employees are being digitally upskilled by tech solution providers, bringing them into the paradigm of a connected ecosystem.
For new Indian UHNIs, venture capital holds enormous promise as an asset class that generates superior financial returns. VC/PE Funds raised during times of economic crisis tend to outperform those raised during non crisis periods. Family offices have only recently begun to recognise this potential. As a result, Indian family businesses have the potential to blossom India's start-up landscape and work together to build a strong community.
Some of India's wealthiest families are likely to be behind the influx of capital that the country's burgeoning startup ecosystem will receive in the coming years. Indian startups are expected to raise around $100 billion in funding by 2025.
According to a report, titled 'Turning Ideas to Gold,' by Networks and Praxis Global Alliance, high-net-worth individuals are expected to invest $30 billion in Indian tech startups by 2025. By then India could add 95 new tech unicorns to its 56-strong unicorn pool.
Ultra high net worth individuals in India those with a net worth of more than $30 million are increasingly establishing family offices to preserve and manage their wealth. In the last five years, family offices have increased their investments in startups. However, it is still in its early stages, with most such family offices preferring to keep the majority of their money in traditional asset classes such as stocks, real estate, and gold.
By 2025, approximately 190 'Soonicorns' are expected to become unicorns. Currently, India has 56 unicorns (companies valued at $1 billion), 14 of which were added in 2021.
India is expected to have more than 10,000 ultra wealthy people by 2025. By that time, they could be worth up to $700 billion. And India's tech startup ecosystem will be an appealing playground for their funds.
Family offices are being established to provide full service private wealth management services to one or a small group of these ultra high net worth individuals. Currently, India has close to 140 family offices that cater to Indian UHNIs and invest heavily in the Indian startup ecosystem. Since 2015, they have been actively involved in more than 50 such transactions each year.
UHNIs in India for diverse backgrounds are now setting up family offices to manage and preserve their wealth.
Several business leaders in India have set up family office like Azim Premji (Wipro), Rishabh Mariwala(Marico), Ratan Rata (Tata Group), RK Damani (Damani group).
Media and sports celebrities have also set up family offices and invested in many tech startups like Yuvraj Singh (YouWeCan Ventures), Priyanka Chopra Jonas (Bumble), Akshay Kumar and Madhuri Dixit Nene (GoQii), and Sachin Tendulkar (Smarton).
Family offices set up by Indian business families based outside India(NRIs) who have made investments are Abhinav Jhunjhunwala (AJ Capital-Singapore), Satveer Singh Thankral (SGAN-Singapore), Satpal Khattar (Khattar family holdings), S. Ramakrishnan (Transworld Group Family Offices-UAE).
Even the tech and digital entrepreneurs have family offices like Aroa Ventures by Oyo's founder Ritesh Agarwal, Titan Capital by snapdeal founder KunalBahl, VSS Holdings and VSS Investco by paytm founder Vijay S Sharma, Navi by Sachin Bansal-Flipkart founder, Leo Capital by Ragul Garj Pine Labs founder.
The opportunity to leverage India's impending tech sector growth remains firmly in the private market. Over 250 private Indian technology companies with valuations greater than $100 million have the potential to go public in the medium term. The private tech market is rapidly approaching the size of the public tech market, and the private tech market is expected to outperform the public tech market soon.
The total market capitalization of public technology companies is 12.6 percent of India's GDP, while private technology companies are valued at 10.2 percent. With the right capital infusion to support tech disruption, India's tech story can mirror that of the United States.
This potential is recognized by family offices. According to 256 Networks analysis, an Indian family office's typical seven year portfolio performance allocates about 20% of their funds to alternative investments such as startups and venture capital. Nonetheless, they outperform most traditional assets in terms of returns. Alternative investments account for approximately 30% of the seven-year average return of a typical family office portfolio, ranking second only to equities. Globally, private market investments have produced 500 basis points higher returns than public market investments.
Speaking about the opportunity for Indian Family Offices investing in technology companies, Kris Gopalakrishnan, the co-founder of Infosys and promoter of Pratithi Family Office, said, “Investments in innovative startups have emerged as a lucrative alternate asset class when compared to traditional investments like equity, debt, commodities, and real estate. However, it is difficult to get exposure to high growth portfolios that use innovations to solve real challenges and build large companies in a relatively short period of time. Backing such companies requires deep expertise, strong networks, patience, and sufficient capital. Funds run by professionals provide that opportunity to Indian Family Offices and UHNIs.”
In COVID-19,Indian Tech enabled businesses outperformed traditional businesses. EdTech, online gaming, e-groceries, and healthtech companies have benefited the most from the pandemic.
Millions of employees are being digitally upskilled by tech solution providers, bringing them into the paradigm of a connected ecosystem.
For new Indian UHNIs, venture capital holds enormous promise as an asset class that generates superior financial returns. VC/PE Funds raised during times of economic crisis tend to outperform those raised during non crisis periods. Family offices have only recently begun to recognise this potential. As a result, Indian family businesses have the potential to blossom India's start-up landscape and work together to build a strong community.
