03/12/19

WEALTH MANAGEMENT: Private Wealth is now Main Source of Venture Capital Funding.

As published on cityam.com, Tuesday December 3, 2019.

A fifth of fundraising by European VC firms in 2018 came from family offices and private individuals as opposed to institutional money, according to research from Dealroom.co for Talis Capital.

Private wealth investment in VC has climbed steadily in recent years, rising from the third largest source of fundraising (at 15 per cent) in 2014 to the largest last year, ahead of asset managers, government agencies and corporate investors.

Talis Capital co-founder and managing partner Matus Maar said the shift was driven by “a new generation of ultra wealthy individuals and families who made their money through tech and want to keep investing in the sector”.

Private wealth has doubled globally over the past decade from $33 trillion (£26 trillion) in 2008 to $70 trillion in 2018.

At the same time, the share of global wealth held by tech entrepreneurs has jumped from seven per cent to 14 per cent.

The research found that recent exits from European tech firms such as Spotify and Adyen had created a new wave of wealthy younger tech founders keen to invest in the sector.

European tech exits have totaled $354bn since 2013, with $115.5bn of these in 2018 alone.

This new generation of investors is far more comfortable backing young tech firms than their predecessors, and are choosing to invest in VC over more traditional asset classes.

During the past decade, private equity and VC have overtaken real estate as the second most popular asset class among family offices, with allocation nearly doubling from 14 per cent in 2008 to 22 per cent last year.

“We predict venture capital and early stage tech investing will only become more popular with the world’s wealthiest, especially as the younger generation are persuading their previous generations that this is where they should be investing,” said Maar.

“They want to create strong legacy investments and work with exciting smart startups that can improve our world for the better in areas like health technology, sustainable farming and food production, mobility and climate change.”