Wealthy Families are an important source of capital for startups, and have been in existence for a long time. John Pierpont Morgan, Eric M. Warburg and John Hay Whitney are names belonging to some wealthy families which played an active role in providing venture capital, and later transformed into large banks and venture capital players in the form of JP Morgan, Warburg Pincus and Whitney & Co.
Wealthy families are again emerging to be a very important source of funding for startup companies. These wealthy families are the multi-millionaires who belong to the most affluent of all classes and can be classified as ultra net-worth individuals. While some of them are 'wealth creators' who have achieved such heights owing to decades of fruitful business involvement, the rest are simply heirs.
These investors focus on the long term and are more concerned about growing their wealth than securing money for retirement. Hence, traditional asset allocation methods are less significant. Wealthy families like to maintain sufficient liquidity. They are hungry for investments outside their domestic market. They rely on prior experiences and expert financial guidance since their investments involve putting in large sums of money every time. Capital preservation and maintaining a balanced diversified portfolio are two major objectives of wealthy investor families.
- Identification of tax-advantaged investment opportunities that fit their unique requirements
- Conducting detailed research into the business model of startups, to analyze the risks and returns of these investments
- Staying away from fraudulent companies and investments that pose a threat of capital loss
- Risk of concentrating investment in a limited number of ventures
- Providing an in-house database of feasible local and global startups that wealthy families may invest in
- Providing tailored solutions based on a thorough understanding of the family's objectives and priorities, including pooling of financial capital from multiple like-minded investors
- Identifying the best tax-friendly investments that suit the family's investment portfolio
- Conducting due diligence and evaluating the fair value of startups for investment
- Helps connect with the entrepreneurs and carry out the financial dealings in a secured environment
- Thorough research on registered entrepreneurs and their business proposals help with the investment decision
- Diversification benefits as a result of pooling of capital enables investments in multiple ventures
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