Family offices have been bullish on the Indian startup ecosystem for quite some time and they feel the COVID-19 crisis will allow them to put patient capital into companies with strong business models.
Valuations will also be corrected, by as much as 50 percent in some sectors, according to Gopal Srinivasan, chairman of TVS Capital Funds.
“By September-October, the bubble of the past will burst. Companies may raise money at lower values, which we call as fair price,” Srinivasan said.
“The cuts can be as high as 50 percent in sectors such as lending,” he added.
Srinivasan said 50 percent of the money in TVS Capital is from family offices.
The COVID crisis has had an impact on startups and investors, with portfolios of family offices also facing the brunt.
KC Ganesh, president of Prayog Advisors which is the family office of Kris Gopalakrishnan, said the portfolio was impacted by 15-20 percent due to COVID-19.
But we believe that we will emerge out of this into the positive in 12-18 months. Our investments are long term, patient capital. Kris is passionate about startups,” Ganesh added.
The good news for startups is that several family offices are sitting on dry powder, but they will focus on startups with strong business models and capital efficiency.
“We closed our fund in March, and since then we have been fortunate to be looking at investment opportunities,” said Rahul Chandra of Arkam Ventures.
“We are seeing sturdy startups and resilient founders. Nothing can be worse than the COVID crisis.We have a cheque book ready and sitting on dry powder,” Chandra added.
The risk appetite of family offices is also growing as the younger generation is taking over.
” The younger generation of family offices is entering the business with higher risk appetite and global experience. There is interest from family offices to go beyond investing as mentors, accelerators,” said Nimesh Kampani, President, LetsVenture Plus.
“The evolution of family offices over the past few years has been dramatic.
Family offices are being created by IPOs, sales of assets, and so the DNA of entrepreneurship is ripe,” said Arihant Patni, managing director of Patni Family Office.
“I have invested in companies just from a passion perspective. We invest alongside the founders, take active board roles and help across the business,” Patni added.
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