Nearly 20 per cent of all money being ploughed into European startups is coming from private wealth as, increasingly, young tech millionaires reinvest funds.
Last year, $5bn of the $28bn invested in Europe’s startups came from individual investors, tripling the amount of private wealth going into venture capital over the past five years.
Indeed, private wealth has become the main source of funding for European VCs as young, rich entrepreneurs ditch traditional assets for venture capital, according to research.
Tech wealth is growing twice as fast as other private wealth sources and is increasingly shifting into European VC funds, says Talis Capital.
Ninety-two per cent of ultra-high-net-worth individuals surveyed by Talis Capital said that they now invest in VCs compared with nearly half who didn’t go anywhere near venture capital a decade ago.
Among ultra-high-net-worths who do invest in VCs, there has been a five-fold increase in popularity in investing more than 20 per cent of their money in venture capital.
And 83 per cent of respondents plan to either maintain or increase the amount of money going into venture capital over the next five years.
Over the past decade, private wealth has doubled from $33tn in 2008 to $70tn in 2017. Fewer than 2,760 billionaires hold $9tn between them and the average wealth of those billionaires is $4bn.
The share of global wealth held by tech entrepreneurs specifically jumped from $300bn in 2008 (a 7 per cent share of the $33tn global wealth) to $1.2bn (14 per cent) by last year.
Since 2013, tech exits in Europe have totalled $354bn with$116bn worth of exits last year alone. As a result, more wealth than ever before is being created by tech founders across the continent, led by the likes of Spotify’s recent $30bn exit.
Altogether the share of global wealth held by individuals holding anything north of $1m in investable assets and based in Europe rose from $8tn in 2001 to $16tn in 2017.
Global family offices
Global family offices have increased the percentage of investments made through private equity and venture capital from 14 per cent in 2008 to 22 per cent in 2018, leapfrogging property as the place to park cash.
Health tech, food tech, fintech and AI topped the preferred list of sought-after sectors when investing, typically at Series A-C level.
Matus Maar, co-founder and managing director at Talis Capital, said: “We are seeing many more investors wanting to invest in tech and data-driven businesses at an earlier stage. In part, this is to do with a new generation of ultra-wealthy individuals and families who made their money through tech and want to keep investing in the sector.
“We predict venture capital and early stage tech investing will only become more popular with the world’s wealthiest, especially as the younger generation are persuading their previous generations that this is where they should be investing.”