Indian family offices have a new favourite—early-stage VC funds
After years of backing late-stage or pre-IPO bets, India’s wealthiest families are shifting capital to smaller venture funds as institutional investors pull back.
Once focused on large, late-stage investments, India’s family offices are now venturing into riskier early-stage startup territory—carving out a small but potentially more rewarding portfolio diversification.
Family offices are increasingly investing more in venture capital firms that back early-stage startups, departing from their traditional playbook of focusing on IPO-ready or pre-IPO funding rounds that deliver faster returns, said fund managers and investment advisors.
While family offices mostly allocate only $2-8 million to such VC funds, the investments open up crucial access to their distribution, supply, and hiring networks, they said.
According to these industry executives, Ranjan Pai’s investment vehicle Claypond Capital, and the family offices of Baldota Group, Amara Raja Group, and Jagran Group (Anikarth Ventures) are actively exploring investment opportunities in early-stage VCs funds.
Nitesh Aggarwal, chief investment officer at the Baldota Group family office, said early-stage VC fund managers are turning to family offices for capital as institutional limited partners are holding back on their investments.
Institutional limited partners, or LPs, such as sovereign wealth funds, pension funds, and insurance companies typically pool their money into venture capital and private equity firms, which, in turn, invest in startups and other companies.
“Given a choice, most early-stage funds would raise [capital] from institutional investors. But currently, institutional LP money from the US has dried up, especially from university funds and pension funds, as many LPs from this category have maxed out their allocation in VC funds, and also because the DPI hasn't been great," Aggarwal said.
DPI, or distribution to paid-in capital, is a performance metric that helps limited partners understand how much of their investment has been returned in actual cash.
The Baldota family office has a total corpus of $130 million. Of this, about $55 million has been deployed across 45 VC funds and 38 startups spanning India, the US, and Israel.
Claypond Capital and the other family offices didn’t immediately reply to Mint’s emailed queries.
- Indian family offices, traditionally focused on late-stage or pre-IPO investments, are increasingly allocating capital to early-stage venture funds, seeking higher returns and more involvement in startups.
- With global institutional investors like sovereign wealth funds, pension funds, and endowments slowing investments in VC, family offices are stepping in to fill the funding gap.
- Early-stage VC investments allow family offices to co-invest, secure advisory roles, and access strategic exits, offering potentially outsized returns from relatively modest capital allocations.
When small is big
Kushal Bhagia, founder of early-stage venture capital firm All In Capital, said, “Many families had disappointing experiences with larger growth funds, so they’re gravitating to smaller funds like ours. They value earlier exits, co-invest options, and the ability to double down on winning portfolios."
Bhagia added that Indian family offices are leaning towards smaller investment vehicles also for closer engagement, including occasional direct investments in portfolio companies—something large funds generally don’t offer.
For All In Capital’s ₹200-crore Fund II, about half of the investment commitments are from family offices, according to Bhagia.
“In a $300 million fund, you might need three or four IPO-scale outcomes just to 3x (triple returns from) the fund. That’s hard. In a small fund, a single $300-500 million outcome can 1x the fund, and a $2 billion outcome can drive 10x [returns]," Bhagia said. “Larger funds naturally tilt toward capital preservation to suit big institutions like endowments and pension funds, which prefer steady 2-3x [returns] over 10 years and low headline risk."
Mumbai-based early-stage VC firm Avaana Capital closed its climate and sustainability fund at $135 million in October 2024 with roughly 15% of the investments coming from family offices.
Sandeep Singhal, senior advisor at Avaana Capital, said family offices account for a modest slice of the firm’s LP base. “Our family office commitments would be less than 10-15% of the fund," he said, adding that the firm expects to raise more from such investors in future funds.
Ankita Vashistha, founder and managing partner at Arise Ventures, said family offices accounted for about 40% of the VC firm’s co-investment deals. Arise Ventures is looking to raise about ₹500 crore for its third fund by the end of the year.
The lure of exits
Small-scale, early-stage funds make money for themselves and their investors (LPs) by backing startups early and exiting early by selling their stakes during Series B or C fundraising rounds, said Vashistha.
“A core focus for us is strategic exits, especially given our enterprise tilt. Not every portfolio company needs to be a unicorn (startups estimated to be worth at least $1 billion). Many [startups] can be acquired for solid triple-digit million outcomes by corporate buyers… Hence, family offices are revisiting their strategy and looking at even thematic funds," she added.
Prateek Indwar, managing director and head of capital markets at financial services firm InCred Capital, said that from an early-stage investing point of view, startup exits are plenty as compared with late-stage funds, where most of the large exits come from IPOs.
“When family offices are choosing early-stage startup VCs over the late-stage funds, it is clearly because the early-stage ecosystem is able to offer a rung of exits from secondary share buyers, mergers, and small, main and SME-board listings," he said.
Indwar acknowledged that as a percentage of their total deployable capital, the early-stage ecosystem was still small for family officers, but growing fast.
Fund managers and investment advisors said the size of investments from Indian family offices into early-stage VC firms are inching up.
A managing partner at an early-stage, deeptech-focused VC firm said average investments from domestic family offices in its first fund were typically $1-2 million, but its recent second fund saw their cheque sizes more than double to $6-8 million. The executive requested anonymity, citing confidentiality terms with limited partners.
A PwC study last year found that family offices generally preferred sub‑$25 million investments and predominantly favoured pooled deals to minimise risk. Large family offices globally accounted for 31% of startup investments, 15% in property investments, and 14% in fund investments (as LPs), it added.
Rethinking the “2 and 20"
Early-stage startup investing remains a high-risk proposition: only a small share of bets deliver outsized exits, and many companies don’t make it to Series A—the first formal round of raising funds from institutional investors. Even so, such deals offer an attractive sleeve for domestic family offices, industry executives said.
Some family offices are even willing to be anchor investors to secure additional rights such as direct co-investments in companies alongside the fund, board seats, advisory roles, and greater visibility into the due diligence process and a fund’s deal pipeline.
VC funds typically run on a “2 and 20" model. Fund managers charge LPs about 2% a year as a management fee during the investment period to cover salaries and expenses related to due diligence, administration, and regulatory compliances. Their upside comes from the “carry"—usually 20% of profits—paid only after LPs first get back their capital, and, in some cases, a specified return on their investment.
But many family offices are pushing fund managers of small VC firms to re-think the traditional “2-and-20" model.
According to Pradyumna Nag, founder and chief executive of Prequate Advisory, paying a 2% annual management fee plus a 20% “carry" over a decade can erode net returns unless a fund manager has a clear, defensible edge.
“As a result, family offices increasingly use a small LP commitment to secure access and information, then deploy larger, selective co-investment cheques into specific deals they like," Nag said. “This approach preserves visibility and influence while reducing blended fees."
Prem Kumar Barthasarathy, managing partner at UK- and India-based VC firm Pontaq, said families typically look for visible value-creation over 12-36 months, clear unit economics, evidence of growth driven by a fund manager’s intervention, near‑term scaling plan, and disciplined governance.
“In short, family offices behave like long‑horizon partners, favouring managers who can show how they’ve taken a company from zero to 10 and can map the next leg with control of execution and oversight."
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