How do European single family offices approach venture capital and what is their exposure to the asset class? Data suggests the true level of investment is under-stated by the actual figures. Highworth, a research firm, peers through the fog to see what the picture is.

(An earlier version of this news item appeared in WealthBriefing, sister news service to this one. The European single family office sector is not as well covered as the US one has been, so we hope that the insights here will interest readers in North America.)

Venture capital is a hot asset class at the moment and in the opinion of some commentators, it needs to take up a larger part of wealth managers’ menus, particularly in the case of families able and willing to adopt a long time horizon. However, there have been concerns voiced from time to time about the amount of “dry powder” (capital available to be committed in VC). 

This news service has decided to drill into the details of the information collected by Highworth Research, the data and information service with which we have an exclusive relationship, to find out more about what single family offices are doing in the VC space. Much of the information shown here applies to Europe, a region that tends not to have the same level of media coverage around VC as is the case in the US, for example. The article comes from Alastair Graham, Highworth’s founder. To find out more about that business and to register for its data, click here.

Family offices’ investment in venture capital in Europe was $5 billion in 2018 according to research commissioned from Dealroom by Talis Capital, a UK multi-family office which is focused on supporting late seed and Series A & B venture rounds for entrepreneurial young companies. According to the Talis Capital research, $5 billion out of a total VC investment in Europe in 2018 of $34 billion was contributed by the private wealth sector, principally family offices and business angels. 

SFOs are larger VC investors than is commonly recorded
However $5 billion is likely to be the value sitting on the surface, and the real number is likely to be much higher for two reasons. The first is that if the difference between the $34 billion total and the $5 billion attributable to the wealth sector is accounted for primarily by VC firms, many such firms will depend on single family offices for an important proportion of their funding. 

The second reason is that, as is well known, many single family offices prefer to fly under the radar and to undertake their VC investments in a discreet and confidential manner. The value of their deals in the asset class are frequently undisclosed. Therefore, family offices are probably contributing much more significantly to VC investment in Europe than is commonly recorded.

Family offices’ investment in VC varies throughout Europe
Furthermore the picture painted by some analysts of the role played by family offices in European venture capital is often too imprecise because it reflects a panoramic Europe-wide lens and fails to take account of differences between the level of VC investment by family offices in different European countries. 

The Single Family Offices Database published online by Highworth Research is able to show the proportion of single family offices investing in each asset class of significance in each country in which SFOs are represented outside the US. For the European region, where the database currently has profiles of nearly 700 single family offices, there are distinct differences between countries in their preference for VC investment. Venture capital investment is undertaken by the following percentages of single family offices in these European countries:

Denmark                         38%
Finland                            60%
France                             71%
Germany                         47%
Italy                                  54%
Luxembourg                   19%
Norway                            21%
Spain                               38%
Sweden                            37%
Switzerland                    31%
United Kingdom           39%

The UK is thought by some to be a leader in European VC investment but in fact comes halfway down the list, fifth out of 11 countries, when family offices’ VC funding activity is examined.