Whalesbook
Shifting Gears: Family Offices Take Direct Control
Family offices are changing their role in the startup world, moving from passive investments (often through funds) to direct co-investments. This trend is fueled by a desire for more control over how their money is invested and frustration with the common VC fee structure (2% management fee and 20% profit share). This shift uses their patient, long-term capital, which often has longer timelines than the typical 7-10 year fund cycles of VCs. This patient approach suits companies focused on steady growth and lasting value, rather than just fast market share gains. Funding rounds show this change: Easy Home Finance received $30 million in January 2026, with Claypond Capital, the family office of Ranjan Pai, involved. Zepto also raised $300 million in 2026, drawing interest from several single-family offices. In 2025, family offices made up 10% of all venture capital deals, the largest share since 2021, showing they are major players.
Moving Past Fees: The 2-and-20 Challenge
The common VC fee model is under pressure as family offices choose to invest directly. Rahul Bhutoria of Valtrust says direct co-investment lets family offices pick deals carefully and potentially earn better returns at lower costs. Pradyumn Nag of Prequate Advisory notes that many VC fund managers are now joining family offices, bringing their skills and helping family offices get VC-like abilities with faster deal-making. Unlike investors focused only on financial gains, family offices often share industry connections and operational know-how, providing key advantages to the companies they back. This move away from the 2:20 structure also stems from the fact that VC fund leadership can be slow to change, making it hard for new talent to advance. Many such professionals are now looking for roles within family offices.
Growing Smarter: Family Offices Build In-House Power
Family offices are becoming more sophisticated investors with stronger in-house skills, moving beyond simply managing money. Many now handle large sums, from ₹500 crore to thousands of crores, making multi-million-dollar investments manageable rather than high-risk. This growth in assets and confidence suggests deal sizes will grow, following a 2025 trend where 70-75% of deals were under $10 million. These offices are forming dedicated investment teams, building networks for deal opportunities, and using their own business experience for careful checks. AI is also becoming standard for research and strategy, with over 57% of offices using it by 2026 to improve their analysis. Their approach to governance is also becoming more professional, with clearer investment goals and transparent reports. Technology and healthcare remain popular sectors, attracting a large part of family office investments.
Potential Pitfalls: Risks in Direct Investing
While family office co-investments offer opportunities, important risks and downsides need examination. The valuation of some startups, like the Benne dosa chain in Mumbai reportedly in talks with Claypond Capital at a ₹350 crore valuation for a ₹35-40 crore investment, questions whether family offices might chase trends and overpay, especially in new sectors like F&B. Also, while 'patient capital' helps sustainable growth, family offices might miss out on faster, profitable exits that VCs pursuing their fund timelines might aim for. This can lead to conflicts if a company needs a quicker sale than the family office is ready for. In the wider venture capital market, much capital is going to a few select companies, especially AI startups, which took 65% of venture deal value in 2025. This concentration carries broader risk, potentially leaving promising smaller ventures unfunded and increasing losses for investors in a narrow, high-valuation market. Family offices' direct involvement could also create governance challenges if strong systems aren't in place, potentially differing from standard reporting and oversight in traditional funds.
What's Next: The Future of Family Office Investment
Experts expect family office influence and investment amounts to keep growing. As their confidence and assets rise, multi-million-dollar checks are likely to become more common. While investments before an IPO are still popular due to clear earnings, there's a growing trend towards companies ready to grow, with 5-7 year exit timelines. This shows a willingness to take on more risk for potentially higher rewards. The quick commerce sector, where Zepto operates, is seeing interest in specialized platforms with focused product ranges and efficient supply chains, moving past the earlier broad rush. The VC market in 2026 is expected to be selective, focusing on quality. Capital will likely concentrate on leaders and AI startups, requiring careful vetting and market understanding. This environment favors selectivity and strong beliefs, suggesting that family offices, with their growing skills and patient capital, are well-placed to handle and benefit from these changing market conditions.