SANTA CLARA, Calif.,
Aug. 11, 2020 /PRNewswire/
-- SVB Financial Group (NASDAQ: SIVB), the parent company of
Silicon Valley Bank, today released the "Family Offices Investing
in Venture Capital - Global Trends & Insights Report" in
partnership with Campden Wealth Research. The report looks at
family offices' investment levels, performance, expectations,
barriers toward venture investments, and their expectations for how
the market will evolve amid COVID-19.
"In the last decade, family offices have emerged as a
significant source of capital fueling innovation globally. They are
increasingly more open and active in venture, particularly in
early-stage companies through direct investments and funds," said
John China, President of SVB
Capital. "Our research with Campden Wealth shows that family
offices are seeing favorable returns in the asset class, and they
are acting as strategic advisors and champions to the startups they
invest in. We expect to see more family office investors in the
venture ecosystem, collaborating and syndicating with like-minded
investors and providing a differentiated pool of capital to
founders."
"We are facing uncertain times due to COVID-19 and an
encroaching global recession. In response, family offices are
showing their strength as nimble, responsive, and patient
investors, often with cash reserves to carry them through turbulent
times," said Dr. Rebecca Gooch,
Director of Research at Campden Wealth. "At present, many family
offices are taking a cautious approach to weather the storm, both
with their VC investments and overall portfolios. Families need
time to digest the ramifications COVID-19 will have on financial
markets and their portfolios. However, some are bullish given
current market conditions and are waiting to capitalize on
opportunistic deals, and in the VC realm, lower entry valuations.
These families are eyeing early-stage investments and funds that
focus on Seed and Series A stage companies, along with placing
greater emphasis on quality managers and diversification to reduce
risk."
Global findings
Following are the key findings from SVB and Campden Wealth
Research's global report, which surveyed 110 representatives of
ultra high net worth (UHNW) families with experience in venture
investing between October 2019 and
February 2020. Additional
COVID-19-related input was collected in Q2 2020. The responding
single-family offices had an average of $797
million assets under management (AUM) and the responding
multi-family offices had an average of $1.5
billion AUM. The full report is available at
svb.com/family-office-report-2020.
Family offices' venture capital investment is on the
rise
Over the last decade, family offices have been increasing
allocations to venture and building in-house venture investment
capabilities, primarily stemming from strong historical returns. On
average, venture investments constitute 10% of participants'
overall portfolios, divided between direct investments (54% of the
average VC portfolio) and funds (46%).
Co-investing is a favored route to share infrastructure and
expertise, with 92% of family offices co-investing alongside other
families and venture funds. Co-investments make up 19% of the
average family office venture portfolio.
Average venture returns are 14%
Family offices' venture portfolios returned an average of 14% in
the 12 months prior to the survey. Fund investments generated
16% returns and direct deals where family offices had minority
stakes returned 17%. These returns met or exceeded expectations for
more than 85% of respondents.
Amid COVID-19, family offices remain optimistic about venture
investing
Sixty-three percent of family offices said capital allocation to
venture will stay the same or increase despite the pandemic.
However, family offices may deploy capital more slowly, place
greater emphasis on quality managers and move further toward sector
diversification.
Average annual family office venture investment includes 10
direct investments and eight fund investments
On average, annual company deal activity included 72 company
pitches and three commitments, with an average investment of
$6.1M. For funds, this included 41
pitches and four commitments, with an average investment of
$7.9M.
Family offices favor early-stage venture
Ninety-one percent of family offices reported being most active
in early-stage venture investments, which have delivered strong
returns. With startups seeking out patient capital and smart
money, family offices deliver by providing strategic guidance
(72%), participating on the board (70%) and facilitating
connections to other investors (70%).
Family offices are most active in direct deals and
funds
Seventy-six percent of family offices invest directly in
companies, and it is most common for them to source their own
opportunities (26%). North America (81%) and Europe (53%) are the hotspots for deals, and
there is significant interest in Israel. Prior to COVID-19, family offices
reported the main barriers to direct investing were competition for
deals (28%) and high valuations (22%).
Eighty percent of family offices invest in funds, reporting that
they are an efficient way to outsource deal flow and due diligence,
with sector-focused funds (80%) and sub-$100m funds (71%) as the most popular. One-third
of family offices believe the highest returns in the next decade
will come from emerging managers. Prior to COVID-19, the most
significant barriers to fund investing were access to compelling
managers (23%) and valuation levels (18%).
Growing interest in ESG investment
Nearly half of family offices engage in impact and ESG VC
investments (47%), and interest in this sector is growing
particularly among the next generation of family office leaders.
Among these investors, the most popular areas for impact and ESG
investments are healthcare and wellness (65%), agriculture and food
(63%), and energy and sustainability (63%). North America is heavily invested in
healthcare and wellness (74% versus 59% for rest of world).
For additional survey results, please
visit: svb.com/family-office-report-2020.
About SVB Financial Group
For more than 35 years, SVB Financial Group and its subsidiaries
have helped innovative companies and their investors move bold
ideas forward, fast. SVB Financial Group's businesses, including
Silicon Valley Bank and SVB Capital, offer commercial, investment,
and private banking, asset management, private wealth management,
brokerage and investment services and funds management services to
companies in the technology, life science and healthcare, private
equity and venture capital, and premium wine industries. SVB
Capital oversees and manages more than $5.5
billion of investment assets across a family of venture
capital funds. SVB Capital has a global institutional investor base
including family offices, foundations, endowments and
pensions. Learn more at www.svb.com.
SVB Financial Group is the holding company for all business
units and groups. ©2020 SVB Financial Group. All rights reserved.
Silicon Valley Bank is the California bank subsidiary of SVB Financial
Group. Silicon Valley Bank is a member of FDIC and Federal Reserve
System. SVB, SVB >, SVB Financial Group, Silicon Valley Bank,
Make Next Happen Now and the chevron device are trademarks of SVB
Financial Group, used under license.
About Campden Wealth
Campden Wealth is a family-owned, global membership organisation
providing education, connectivity, research and networking
opportunities to families of significant wealth, supporting their
critical decisions, helping to achieve enduring success for their
enterprises and family offices, and preserving their family
legacy.
Campden Research supplies market insight on key sector issues
for its client community and their advisers and suppliers. Through
in-depth studies and comprehensive methodologies, Campden Research
provides unique proprietary data and analysis based on primary
sources.
Campden Wealth publishes the leading international business
title CampdenFB, aimed at members of family-owned companies in at
least their second generation.
Campden Wealth owns the Institute for Private Investors (IPI),
the pre-eminent membership network for private investors in
the United States founded in 1991,
and the Campden Club, a global membership network for families and
family office executives. Campden further enhanced its
international reach with the establishment of Campden Family
Connect PVT. Ltd., a joint venture with the Patni family in
Mumbai in 2015.
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SOURCE SVB Financial Group