Why family offices are betting on Micro VCs

A quiet change is underway in how private wealth in India is being deployed.

The last five years have seen the rise of over 300 family offices, up from fewer than 50 in 2018. As businesses mature and generational transitions unfold, more promoters are professionalising their capital — building structures that invest across asset classes, from public markets to private equity and venture.

And increasingly, that venture bucket is growing.

According to the EY–256 Network Family Office Report 2024,[1]  family offices are now allocating 8–12% of their corpus to venture capital, driven by a desire to participate early in India’s innovation story. Many started by investing directly into startups. It seemed natural. They understood business, they had capital, and they wanted proximity to founders.

However, venture is a different animal. Deals come unannounced, paperwork drags, and governance can be murky.

Some learned the hard way: Investing in late stage deals where early backers (that ideally would’ve written follow-on cheques) looked for exits, where companies used the equity raise to pay back their ballooning debt, or where founders siphoned off funds to buy prime real estate overlooking a golf course. That’s when the family offices started understanding the importance of the shift from direct startup investing to partnering with funds that could bring discipline, diligence, and diversification.

Then for a while, that access came mostly through large institutional funds: multi-hundred-million-dollar vehicles backed by global LPs. But those relationships often felt distant. Reports came quarterly, calls were scheduled, and co-investment conversations took months.

Over time, another kind of fund began to take shape: microVCs – smaller, domestically backed, early-stage funds with tight portfolios and closer relationships with both founders and LPs. They weren’t competing with large funds; they were filling a gap those funds had outgrown.

The Rise of MicroVCs – A Two-Way Collaboration

MicroVCs typically manage between ₹100 crore and ₹500 crore, with teams that meet hundreds of founders a month but invest in only a handful. This focus creates room for genuine alignment. Family offices investing in these funds started getting direct access to the partners, not just dashboards. They could discuss themes, understand the pipeline, and co-invest alongside the fund in breakout rounds. This proximity built trust – which in turn made collaboration possible.

Increasingly, that collaboration runs both ways.

When a fund looks at a company in, say, logistics technology, it can lean on an LP who runs a large distribution business for perspective: Does this solve a real bottleneck? Is the cost saving meaningful?

This kind of on-ground insight is something only India’s family offices can offer, and it quietly strengthens the entire diligence process.

For fund managers, these investors become domain experts, partners, and advocates. For family offices, it’s not just about the capital deployed; it’s about using their knowledge pool to give their investments an edge.

The best of these funds have chosen to remain small by design. A tighter fund size means more time per founder and less pressure to deploy capital for the sake of it. It also allows them to carve out thematic focus areas which are broader than sectors, but shaped by macro trends. To elaborate further,  Premium consumption, fintech infrastructure, applied AI, deeptech – these are not narrow verticals but opportunity clusters, each large enough to support multiple adjacencies. Premium consumption doesn’t only include D2C brands; it extends to IoT-enabled vending machines, premium co-living spaces, pet-health apps, and more.

Some funds have also gone all-in on sectors like deeptech or consumer, where India’s talent and consumption engines are both accelerating. Across themes and sectors, this focus helps investors engage deeper in the areas where they have expertise, and allows fund managers to curate the right set of family offices to collaborate with.

In conclusion, what’s emerging is a more symbiotic venture ecosystem – one where capital, expertise, and relationships move in both directions. Family offices are no longer passive cheque-writers but have evolved as active participants, co-investors, and sometimes early customers.  MicroVCs and family offices may have started on opposite sides of the table but are increasingly building the same thing – conviction in India’s long game.

The author is Head – Family Office Relationships, Artha Group.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.