Family Office Investments in Start-Ups: Commentary from Kyto Technology & Life Science, Inc.
Family office interest in investing in start-ups is on the rise as the asset class continues to grow in popularity and groups such as the Band of Angels, Keiretsu Forum and other angels are a great source of deal flow, according to Kyto Technology & Life Science, Inc. (OTCQB: KBPH), which invests in seed and angel stage privately held technology and life science companies in the United States, Canada and Israel.
“As an example, Band of Angels filters through a thousand of companies every year and selects around 50 to present to the group each month. Of those, maybe 5-10 compete for three slots at a monthly dinner presentation to a larger audience – in the end, investing in around 20 start-ups per year. Other sophisticated angel groups have a similar process. Since they’re investing their personal money, angels tend to be more careful than VC firms that invest other people’s money which represents a key differentiator,” said Kyto CEO and Board Member Paul Russo.
“Every year there are hundreds of thousands of start-ups and only a handful will succeed. The challenge is how to identify the 1 percent that will. We realize that massive due diligence and deal flow is available from these angel groups and similar ecosystems, so we use that to our advantage by taking what they have and then doing our own due diligence. In cases where new start-ups become part of accelerators, angel groups typically get involved after the accelerator process but before venture capital firms get involved. Multi-level vetting is an ideal way to identify companies with the highest potential and we invest in the top 1-2% of opportunities from the thousands of start-ups reviewed annually,” said Russo.
Kyto’s investments are either in the form of secured convertible debt accruing interest and offering a discount upon conversion to preferred shares, or directly into preferred shares. KYTO seeks seed and post-seed early stage companies with strict criteria and invests after solid validation by a sophisticated group of segment-specific experts and its own investors and board. It maintains a relationship with each portfolio company via a signed fee-paying advisory agreement or via board membership. KYTO expects that each portfolio company will have a liquidity event within 2-4 years of receiving a KYTO investment, and these new funds will be re-invested in additional start-ups to grow its portfolio.
For information, contact Paul Russo at firstname.lastname@example.org or +1-408-605-7695