Over the last few years, technology has cemented itself as one of the most prevalent and rewarding investment landscapes for family offices. As technological innovation continues to evolve, business procedures are following suit — ultimately resulting in the emergence of new tech startups at a rate faster than ever before. Consequently, direct family office investments in deep tech companies - a growing subset of the tech industry - are soaring alongside.
- Defining Deep Tech
- Family Offices Investing in Deep Tech
- Industry Origin of Wealth Breakdown
- Regional Breakdown
- Assets Under Management Breakdown
Deep technologies have the potential to deliver dramatic improvements over advancements currently in use. With that said, large investments and a considerable amount of effort will be necessary to bring these technologies from the lab to the market. In an effort to shine a light on family offices harnessing deep tech opportunities, we have provided a breakdown of data demonstrating this growing trend. Unless otherwise cited, all data within this narrative was derived using the FINTRX family office data and research platform.
Defining Deep Tech
Deep tech is a relatively new term (coined in 2014 by Swati Chaturvedi) used to describe a set of disruptive technologies based on scientific discoveries, engineering, mathematics, physics and medicine. However, companies applying existing technologies (such as Uber, for instance) differ from those in the deep tech space, which are known to make 'veritable scientific progress with corporate implications'. To distinguish one phenomenon from the other, the term 'deep tech' was created. Deep technologies present unique opportunities for investors to catalyze change and lay the foundation for further novelties. That said, family offices are eager to jump on board.
Why would deep tech investments be fruitful for family offices?
Family office investors are frequently characterized as being opportunistic, flexible and patient over the long term. These traits make them ideal candidates for deep tech companies seeking capital. It's important to note, investments into deep tech companies differentiate from investments into the greater tech industry, as they often require the investor to stake their capital, knowing they may not see immediate returns (due to the significant amount of scientific research and development required for such companies to come to fruition). Sacrificing short-term alpha (which is a primary characteristic of family office investors, to begin with) is extremely rewarding for the deep tech investor, as long-term yields from deep tech investments have not only proved to be highly profitable, but extremely beneficial to societal growth also.
Today’s innovators have a wealth of technological capability at their fingertips. Over the last few decades, novel advances have been driven by the use of progressive platform technologies (desktop computers, world wide web, mobile technologies, etc.) that ultimately led to a variety of applications in industries across the board. Companies that began as digital businesses are increasingly reshaping their strategies toward deep tech as well. Investors and companies are now looking for the next source of deep tech advances capable of fueling the next industrial revolution.
One of the most notable rising trends, however, is the role of deep tech startups and its increasingly important collaborations with family office investors. By harnessing the FINTRX family office data and research platform, we frequently see allocations into deep tech companies. For example, Icon - a Texas-based deep tech startup founded in 2017 - received Series A funding from Vulcan Capital - a Washington-based single family office. They later received a Series A from Caz Investments - a Texas-based multi family office. Icon develops advanced technologies that advance humanity through the use of 3D printing robotics, software and advanced materials.
Family Offices Investing in Deep Tech
Single Family Office / Multi Family Office Breakdown:
Industry Origin of Wealth Breakdown: Top 4 Industry Wealth Origins
Companies and investors themselves have a lot to gain from deep technologies, but harnessing their potential advantages takes a new approach to working with external partners. When it comes to family offices, we often see these private wealth entities identifying the capabilities that a startup can leverage (data, client network, business knowledge, facilities, mentors, technical experts, cash flow monitoring, etc.). Besides helping a startup become a potential business partner, giving it access to internal resources can help spread an entrepreneurial spirit which often leads to higher returns in the long run.
Family office investors are looking elsewhere for 'the next big thing' in tech. Many seek technologies that have the potential to solve major societal and environmental issues, drive economic growth by improving on current products and services, create new markets and enhance underdeveloped countries. As you can see below, deep tech is the most prominent among family offices throughout North America, though other regions seem to be on pace with this developing trend.
Assets Under Management Breakdown:
A number of trends have brought us to a point of major change in how deep tech research is pursued and brought to market. Innovation is a much more fragmented and diverse endeavor than ever before — geographically, functionally, and industrially. Some suggest that we are at the beginning of a new cycle that could carry on for generations to come. Clearly, a new deep tech ecosystem is taking shape, with big ramifications for all players, most notably - companies, investors and startups.
The dramatic rise in deep tech appeal - and its broadening reach to new investor classes - is emphasized within the global family office market. As outlined in the chart below, on the left, the greatest number of family offices taking interest in deep tech investments fall between the $50 million and $100 million marks.
All data (unless otherwise cited) was derived using the FINTRX family office data and research platform.
The technology landscape is constantly evolving, but companies need to know today which technologies will drive the greatest digital disruption and economic change over the next decade. Although deep tech is still in its infancy stages, it surely has the potential to be a defining investment for family offices moving forward. Not only does this landscape allow for remarkable change, but such advances allow their family office to flourish for generations to come. Popularity in deep technologies is only beginning to grow, proving to be exceedingly advantageous to early investors. There is no doubt that this subset of the tech industry will continue to transform businesses and society as a whole. That said, the time to craft a deep tech investment strategy is now.
- - Deep technologies lie at the crossroads of massive shifts in demand led by trends such as global climate change, demographic shifts, resource scarcity and an aging population are impacting all industries.
- Companies themselves have a lot to gain from deep technologies, but harnessing their potential advantages takes a new approach to working with external partners.
- - Increased sophistication allows for more opportunities to broaden internal investment capabilities.
The FINTRX family office data and research platform combines over half a million data points on 11,000+ family office professionals and 3,000+ unique family offices worldwide. Built with the asset-raising professional in mind, FINTRX features state-of-the-art data exploration and visualization tools, engineered to provide the most effective means of targeting family office LPs. As family offices continue to diversify their investment allocations and advance the scale of their operations, the FINTRX data platform constantly evolves alongside.
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