Global family offices upbeat on Indian startup ecosystem: Lakshmi Narayanan

Lakshmi Narayanan says ambitious valuation, transparency issues still a major challenge for investors in Indian startup sector

Family offices across the world are betting big on the Indian start-up ecosystem as it is the most vibrant and biggest one globally, because of the large consumer market, said Lakshmi Narayanan, managing partner of Patel Family Office, one of the oldest family offices in North America. Narayanan added that ambitious valuation and transparency issues are still a major challenge for investors in the Indian startup sector.

According to estimates, India has 350 family offices at present, with an average asset under management of $100 million each. A family office is a privately held entity that manages investments and wealth for a family who have a minimum of $50-100 million. The aim of such offices is to invest the family’s private wealth.

“India is the most vibrant ecosystem at this juncture If you look at the global space, in the start-up ecosystem. At present, the US is No. 1 and the UK is going through a rough patch. The advantage with India is that it has the biggest ecosystem with the largest consumer market to consume those innovations,” Narayanan told Business Standard.

According to the media reports, the number of family offices globally range between 6,000-10,000 and in India it is expected to touch 1,000 mark soon, due to the rising number of billionaires and millionaires in the country. At present, the country has 166 billionaires and by 2026, the number of US dollar millionaires are expected to touch 1.6 million.

According to a report by Trica, the private market portfolio of Indian family offices include direct startup investments at 47 per cent, exposure to venture capital or private equity funds at 32 per cent and exposure to venture debt funds at 11 per cent.

“The challenge in the sector is the way to exit the startup ecosystem. The number of companies that got publicly listed in the start-up ecosystem within India or those companies outside India are very small. Valuations of Indian companies are too ambitious. That is the problem in space,” Narayanan said.

He added that another issue is transparency, as unlike in the United States, companies are not getting penalised for doing something wrong. “So, entrepreneurs think that they can raise money, do something and cook their books. Why a lot of global players are not coming into the system is because of transparency concerns. In the last ten years, there has been a lot of improvement in this regard, but some of the cities are still struggling,” he added.

The Patel Family Office is a third-generation family office focussing on sustainable and responsible investment in housing , healthcare , hospitality , entrepreneurship, environmental science and energy transition. It has been in the hospitality industry for over 50 plus years and has deep expertise in hospitality and real estate across the US, the UK and Middle East.

The family office is currently owned and led by Dipika Patel, a third-generation hospitality industry professional turned entrepreneur. Dipika spent her early days in Wall Street working for the leading financial institutions before taking over the family mantle.