The Shift in Family Office Investments: AI Startups on the Rise

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In a surprising twist, private investment firms of the ultra-rich are recalibrating their strategies amid the ongoing impact of President Donald Trump’s tariffs. As we explored in April, these family offices—a key player in the investment landscape—have significantly scaled back their deal-making activities.

A Decline in Direct Investments

In April, single-family offices made only 40 direct investments, marking a staggering 31% drop compared to the previous month and a 47% decline year-over-year. This retreat raises important questions about the dynamics affecting wealthy investors during uncertain economic times. Those in the know might wonder how family offices are adjusting their portfolios and where they’re focusing their attention amidst these wider market shifts.

AI Startups: A Bright Spot

Despite the overall downturn, one sector is still attracting substantial interest: artificial intelligence (AI). Remarkably, half of last month’s direct deals involved AI-related startups. Among these, SandboxAQ has emerged as a noteworthy player, finalizing its Series E round with an astounding $450 million injection. This figure wasn’t just a fluke; it was the result of demands so high that the round had to be upsized—not once, but twice, as highlighted by CEO Jack Hidary.

SandboxAQ is not just any startup; it spun off from Alphabet in 2022 and is chaired by former Google CEO Eric Schmidt. The company specializes in leveraging both AI and quantum technology for large-scale predictions and statistical analyses, servicing various industries from drug discovery to financial modeling.

Support from High-Profile Investors

The interest from family offices has been robust, with notable figures like Jim Breyer, Marc Benioff, and David Siegel investing in earlier funding rounds. In fact, the latest extension of SandboxAQ’s funding round included contributions from hedge fund titan Ray Dalio, showcasing that even the most influential investors see potential in the convergence of AI with traditional sectors.

Hidary views these family offices as valuable assets, remarking, “These are very value-added family offices because they know the world of tech well. They know the world of finance well.” This expertise is crucial, especially since technology investments require a nuanced understanding of market dynamics.

The Shift Towards Deep-Tech Investment

Interestingly, the paradigm around tech investments is shifting. Traditionally, family offices steered clear of deep-tech startups, viewing them as outside their expertise. However, as Hidary points out, there’s a growing realization that investing in well-established but cutting-edge companies is less risky than relying solely on consumer-oriented tech, which can be easily commoditized.

He elaborates on this trend: “What they realize, after years of investing in consumer-oriented tech … is that it’s easily commoditized.” As family offices start recognizing the potential in deep technology, the landscape for investments is evolving.

Faster Decision-Making

Family offices typically enjoy faster decision-making processes than traditional institutional investors. Hidary mentions that while some family offices desire extensive technical knowledge before investing, others are more agile and ready to jump in once they see potential. An example of this is Breyer, who conducted multiple discussions with Hidary to delve deeper into the intricacies of relevant books that covered essential topics related to AI and investment.

The Long-Horizon Approach

It’s important for families to understand the nuances of long-term investments in tech startups. In initial discussions, Hidary gauges investors’ patience for developing a sustainable company. “You don’t want a family office that’s here to just flip a burger,” he laughs. “We’re looking to build a global company in the top echelon of tech companies.”

This focus on ambition and a long-term vision has attracted a specific clientele—those who align with SandboxAQ’s goals and can appreciate the pace of innovation and its challenges.

Conclusion: A New Era for Family Office Investments

As the investment landscape continues to evolve, the emphasis on deep technology, particularly within the AI sector, signals a promising shift for family offices. With the support of knowledgeable investors and a willingness to adapt to market realities, companies like SandboxAQ are poised to not only attract funding but also to redefine what success looks like in the tech industry.

For those interested in this rapidly changing world, remaining informed about the latest trends in family office investments will be crucial. To stay updated, consider subscribing to our Inside Wealth newsletter, which provides insight into the evolving dynamics of high-net-worth investors and the opportunities that lie ahead.

Explore more about family offices and the tech landscape in our articles on AI startups and investment strategies.