\n\tRIYADH: Family offices have traditionally been influential in private capital investment, but their role in business funding and early-stage startups has often remained under the radar. \u00a0<\/p>\n
\n\tHistorically, these entities have prioritized wealth preservation, stability, and strategic investments aligned with their company interests. \u00a0<\/p>\n
\n\tA shift is underway, however, with family offices increasing their exposure to venture capital through direct investments, fund allocations, and partnerships with startup incubators. \u00a0<\/p>\n
\n\tFamily offices across the Middle East and North Africa are recalibrating their investment strategies, emphasizing stability and selective diversification, according to a Campden Wealth and HSBC Global Private Banking report. \u00a0<\/p>\n
\n\tReal estate remains a dominant asset class, accounting for 34 percent of portfolios and showing a net increase in interest of 44 percent, which reflects the difference between the share of family offices planning to raise their holdings and those intending to reduce them, demonstrating strong momentum in property investments. \u00a0<\/p>\n
\n\tBonds and commodities are also gaining traction, with net increases in interest of 33 percent and 50 percent, respectively, as family offices prioritize reliable asset classes amid global economic uncertainties.\u00a0<\/p>\n
\n\tIn contrast, MENA family groups show a limited appetite for expanding their exposure to private equity or debt, with minimal net change reported in these categories. \u00a0<\/p>\n
\n\tThis stands in stark contrast to family offices in Europe and North America, where private equity remains a primary focus. \u00a0<\/p>\n
\n\tDespite the restrained interest in private equity overall, 58 percent of MENA family groups are active in VC, favoring early-stage investments such as angel and seed funding at 50 percent, as well as growth-stage opportunities at 50 percent.\u00a0<\/p>\n
\n\tThe findings reflect a measured approach, balancing traditional, stable investments with selective forays into innovation-driven sectors.\u00a0<\/p>\n
\n\tPaula Tavangar, chief investment officer at Injaz Capital, a regional investment firm, believes that the shift is moving quickly.<\/p>\n
\n\tIn an interview with Arab News, Tavangar emphasized that Saudi family offices are increasingly expanding beyond traditional asset classes and recognizing VC as a key investment opportunity.\u00a0<\/p>\n
\n\t\u201cWith above half already investing in early-stage companies, this shift is well underway,\u201d she said. However, she noted that while many family offices seek direct access to promising early-stage investments, they often lack the infrastructure to efficiently evaluate and structure deals.<\/p>\n
\n\tThis shift in investment strategy is driven in part by second-generation family office leaders who are more innovation-focused.\u00a0<\/p>\n
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\n\t\tPaula Tavangar, chief investment officer at Injaz Capital. Supplied<\/figcaption>
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\n\t\u201cThey seek exposure to both local and global early-stage opportunities, whether through setting up their own shop, being an LP (limited partner) in VC funds, or mandating external experts like us,\u201d Tavangar said.\u00a0<\/p>\n
\n\tInjaz Capital has been actively sourcing and reviewing deals for family offices in both early- and growth-stage investments in Saudi Arabia. \u201cFor example, we invested in the latest round of Xpence, a smart business spend platform,\u201d she said.<\/p>\n
\n\tWhile fintech and e-commerce have traditionally dominated Saudi VC, Tavangar noted these sectors are becoming saturated.\u00a0<\/p>\n
\n\tFamily offices are shifting toward industries aligned with their core businesses and national priorities, including deep tech, renewables, and health tech.<\/p>\n
\n\t\u201cHealthcare spending is expected to total $180 billion by 2029, with increasing incentives for private investment,\u201d she said, citing a $10 billion localization gap in the Kingdom\u2019s pharmaceuticals and medical devices sector.\u00a0<\/p>\n
\n\tInjaz Capital is addressing this through MENA Hayah, its health tech-focused investment platform.<\/p>\n
\n\tThe relationship between family offices and VC firms is changing. Currently, about 70 percent of these groups in MENA source deals through their own networks instead of investing in VC funds, but this trend is shifting.<\/p>\n
\n\t\u201cAs the Saudi startup ecosystem matures, family offices are increasingly exploring structured partnerships with VC firms,\u201d Tavangar said. Many prefer co-investment models in late-seed and series A+ rounds over traditional fund commitments.<\/p>\n
\n\tLarge family groups are also launching sector-specific investment arms and collaborating with specialized VCs to gain proprietary deal flow and expertise.\u00a0<\/p>\n
\n\t\u201cThe goal is not just to follow an investment trend but to help build an environment where family offices can contribute meaningfully to economic growth while effectively managing risk,\u201d Tavangar added.<\/p>\n
\n\tSpeaking with Arab News, Thomas Kuruvilla, managing partner of Arthur D. Little Middle East and India, explained that family offices have typically avoided VC due to their preference for control and long-term investment horizons. \u00a0<\/p>\n
\n\t\u201cMinority stakes in VC funds often fail to provide this comfort,\u201d he noted. VC firms tend to focus on short-term portfolio diversification and exit strategies, whereas family offices emphasize stability. \u00a0<\/p>\n
\n\tAdditionally, many family groups have been cautious about early-stage investments because generating quick returns often contradicts the values they seek to instill in future generations.\u00a0<\/p>\n
\n\t![\"\"](\"https:\/\/www.arabnews.com\/sites\/default\/files\/pictures\/March\/3428266\/2025\/thomas_kuruvilla.jpeg\")
\n\t\tCaptionThomas Kuruvilla, managing partner of Arthur D. Little Middle East and India. Supplied<\/figcaption>
\n<\/figure>\n
\n\tKuruvilla highlighted several factors driving a change in approach, adding: \u201cYounger family members are more tech-savvy and comfortable investing in emerging technologies.\u201d\u00a0<\/p>\n
\n\tFurthermore, portfolio diversification is becoming a priority, with family offices seeking access to disruptive business models and new technologies. \u00a0<\/p>\n
\n\tReputation building is also a motivator, as participation in prestigious VC funds enhances their credibility as serious venture investors. \u00a0<\/p>\n
\n\tAs a result, family offices are becoming major players in VC, offering long-term perspectives, sector expertise, and capital beyond mere financial investment.\u00a0<\/p>\n
\n\tSpeaking to Arab News, Achal Aroura, head of multi-family office EMEA at Klay Capital Limited, highlighted that many family offices have been investing in startups for years.<\/p>\n
\n\tHowever, these investments often go unnoticed because they are structured as bilateral rather than traditional VC transactions.\u00a0<\/p>\n
\n\t\u201cThe reason they go unnoticed is that these investments are not seen as traditional venture capital investments, but rather strategic investments made by these families and their existing businesses,\u201d he explained. \u00a0<\/p>\n
\n\tHe added that firms like Klay are helping family offices take a more institutionalized approach, facilitating early-stage investments through venture funds, direct deals, and collaborations with startup incubators. \u00a0<\/p>\n
\n\tFamily offices tend to invest in industries that align with their broader investment goals and expertise. \u00a0<\/p>\n
\n\tKuruvilla identifies real estate, artificial intelligence, and healthcare, as well as biotechnology, renewable energy, and fintech as key areas of interest. \u00a0<\/p>\n
\n\t\u201cMany Middle Eastern family offices incorporate Islamic finance principles, ensuring compliance with ethical and religious guidelines,\u201d he added. \u00a0<\/p>\n
\n\tAroura echoed these observations, noting a focus on technology-enabled startups in real estate, finance, and consumer sectors. \u00a0<\/p>\n
\n\t\u201cLately, we have seen a lot of interest in data centers and AI-enabled startups and businesses,\u201d he said.\u00a0<\/p>\n
\n\tObediah Ayton, chairman of Dhabi Hold Co., provided a contrasting perspective, explaining that family holdings \u2014 common in the UAE \u2014 differ from family offices in their investment approach.\u00a0<\/p>\n
\n\t\u201cA family office typically invests in liquid strategies or acts as LPs in VC funds,\u201d he told Arab News.<\/p>\n
\n\tIn contrast, family holdings deploy capital directly from the business level, which can lead to frustration around the speed of investment decisions. \u00a0<\/p>\n
\n\tAyton explained that startups approaching family holdings or offices typically need to demonstrate alignment with the family\u2019s business interests, such as solving an operational problem or reducing supply chain costs. \u00a0<\/p>\n
\n\t\u201cThe times we have seen investment is normally by an Al-Futtaim investing in mobility \u2014 why? Because eventually, they want local distribution or vice versa, to expand their own products through that vertical into new markets,\u201d he said.\u00a0<\/p>\n
\n\t![\"\"](\"https:\/\/www.arabnews.com\/sites\/default\/files\/pictures\/March\/3428266\/2025\/obediah_ayton.jpg\")
\n\t\tObediah Ayton, chairman of Dhabi Hold Co. Supplied<\/figcaption>
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\n\tAyton also emphasizes that family offices rarely lead funding rounds due to a lack of in-house capabilities and risk appetite. Instead, they prefer to see reputable investors already involved.\u00a0<\/p>\n
\n\t\u201cSitting on a cap table rarely happens, and if they do, they want to see good names that priced the business and revenues,\u201d he explained. \u201cIf a startup with no revenue comes along, as opposed to a startup with known investors, I know which one is better for my job security within the family business.\u201d \u00a0<\/p>\n
\n\tTo optimize their participation in VC, family offices are adopting various strategies. Kuruvilla suggests leveraging their industry knowledge and entrepreneurial experience to support portfolio companies. \u00a0<\/p>\n
\n\tDirect investments allow for greater control, while partnerships with VC firms enhance due diligence. He also noted the growing involvement of younger family members, which introduces fresh perspectives and ensures long-term commitment to venture investing.\u00a0<\/p>\n
\n\tAroura outlined three primary ways family offices are engaging in startups: \u201cThrough early-stage venture capital funds, direct seed investments with founders, and through early-stage incubators from within the venture capital ecosystem.\u201d \u00a0<\/p>\n
\n\tThese approaches provide a balance between institutional expertise, direct influence, and exposure to high-growth startups.\u00a0<\/p>\n
\n\tThe intersection between family offices and VC firms is also evolving. Kuruvilla highlights increased capital allocations to alternative assets, including co-investment opportunities that offer access to high-quality deal flow and shared risk management. \u00a0<\/p>\n
\n\t\u201cFamily offices offer patient capital, ideal for emerging technologies and industries requiring substantial upfront investment,\u201d he said. \u00a0<\/p>\n
\n\tSector expertise also plays a role, as family offices that leverage their industry knowledge tend to achieve better growth outcomes. Additionally, a focus on impact investing is emerging, particularly among younger generations who prioritize sustainability and social good.\u00a0<\/p>\n
\n\tAroura emphasized that VC funds bring an institutional approach to early-stage investing, helping family offices diversify their risk while accessing a curated portfolio of startups. \u00a0<\/p>\n
\n\t\u201cFamily offices are starting to support venture capital funds, as these funds bring experience and an institutional approach to building a portfolio of companies that helps to diversify their risk of investing in early-stage startups,\u201d he explained.
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