Chetan Mehta on family office professionalisation and venture capital strategy
Chetan Mehta, the angel investing chief strategy and investment officer of Transworld Group, will discuss how venture capital and startups are providing rewarding opportunities for family office investors as chairman of the next Campden Family Connect forum.
Mehta is also chief executive of WAMI Capital, the family office of the Transworld Group family business, and is based in Dubai. At WAMI, besides managing a global portfolio of different asset classes, Mehta builds an alternate investment portfolio of venture/startups, investing in more than 25 startups across India, Israel and the United States. Mehta is also an angel investor himself with investments in 20 global startups and mentors aspiring entrepreneurs.
For WAMI, Mehta formulates the investment strategy to maximise the investment returns within acceptable levels of risk through a diversified portfolio of fixed income, global equities, real estate and alternate investments. He performs investment and portfolio management activities, from deal flow to execution.
Mehta has been instrumental in institutionalising the WAMI family office by designing its governance framework, investment policy and strategic asset allocation framework.
Ahead of his chairmanship, CampdenFB asked Mehta what he looks for as an angel investor, the sectors he is excited by and what families and startup entrepreneurs can learn from each other.
What are the key messages you want to send to families as chairman of the virtual Campden Family Connect Indian Family Alternative Investment Forum on 11-12 August?
The alternative asset class constitutes almost 50% of global family office asset allocation (1). Traditionally, Indian families have had a substantial allocation to asset backed alternative investments, primarily real estate and gold. Over the years, alternative asset classes like private equity and venture/startups investments have found their way to family office portfolios. Very recently venture debt and investing in crypto have been making their case for capital allocation.
Over last few years, investing in venture funds and directly in startups have gained substantial traction. There has been tremendous increase in the number of early stage VC funds. Further various startup accelerators are now providing opportunities to retail investors to get exposure to investing in start-ups with smaller ticket sizes. However, one needs to be diligent before deploying capital given that valuations have increased, companies/VC funds accessing capital have grown multifold, exit probability is unclear and past performance and distributions from the VC/PE funds have been abysmal.
I would like to share with my peers how family offices and investors should approach this emerging asset classes of startup and VC investing. Further I believe that investing in startups provides an opportunity to work with founders and to support entrepreneurship in the country, which in turn can be a rewarding experience besides generating significant alpha to the overall portfolio.
How should family offices approach venture capital investing?
I believe venture as an asset class can add significant value to a family portfolio. Family offices who are new this asset class can start with evaluating VC funds and spread investments over two to three funds in various themes/sectors. One should closely monitor the underlying portfolio companies and develop deeper understanding of the space. Families should seek co-investment opportunity in the startup they would like to directly participate in. Developing a good network with VC/founder community is very important. One can also participate in pitch day events of various angel networks, institutions, etc and evaluate the startups for investing directly. Families can start with relatively small allocations and diversifying across vintages and sectors. Spread your direct investments over at least 10-15 startups. Be clear of the exit time frame and the rights one should negotiate for while investing directly into a startup. Double down on your winners from your portfolio. VC/ startup investing can offer superior returns and generate alpha for the overall family office portfolio. However, one needs to allocate significant time, understand risk and be patient as one develops a portfolio of VC / startups.
What is your criteria when considering WAMI Capital investments in startups?
At WAMI, we invest in startups globally. Till date, we have made more than 25 investments directly into startups. We are sector agnostic and we proactively seek opportunities which either have an innovation or a consumption theme or both. Our investments have been in the United States, Israel and India so far. We try to look into the future and evaluate whether the portfolio company will be able to create market impact say in near future.
Some of our investments like Etoro (social trading platform), SpaceX (space transportation), Arbe (Radar technology for autonomous cars), Daily Harvest (online food tech), Capsule (Digital pharmacy), Waterfield Advisors (India’s premier boutique wealth advisory firm), Sharechat (Indian social media) and Ledger (security for crypto) have been based on this thesis.
We are very bullish on India. India has a huge demographic advantage with its large, youthful population which will drive consumption over the coming decades. The entrepreneurship/startup ecosystem has matured over the last decade and exit ratio has improved significantly. New age founders are looking at building global businesses. India will see significant increase in unicorns in coming decade and we are very excited to participate in this growth story.
Which assets and/or sectors are exciting you the most as an angel investor?
Post Covid, there has been a substantial shift in how we are consuming goods and services. Further along with Aadhar, UPI, Jio and Google Maps, Covid has accelerated growth of digital and tech enabled businesses. Healthtech, edtech, foodtech, EV, ecommerce and internet brands, fintech, robotics and cybersecurity are some of the sectors which will see increased investments. Further, agriculture and logistics are sectors in India which have tremendous scope of disruption going forward.
Are there lessons families and aspiring entrepreneurs can learn from each other?
Entrepreneurs can draw upon the rich experience of the families, who have been entrepreneur themselves, and obtain their strategic inputs. Further families can work closely with entrepreneurs and help fast track and scale up their businesses by providing them access to inhouse business skillsets and also opening doors to their network.
Families on the other hand can stay updated on the latest technologies and business models which are disrupting traditional businesses. Families and start up entrepreneurs can definitely add lot of value to each other.
What do families need to know before investing in crypto currencies and digital assets?
Crypto currencies and digital assets are here to stay. We have seen that in the last two years more managed and institutional money has entered into this space. I personally know many ultra-high net worth investors who are trading crypto. I see that we are in the midst of a transition from physical cash to digital wealth and therefore this space offers a tremendous opportunity in the years to come. It’s now only a question of when will investors start looking at this space as part of their normal asset allocation process.
Families along with family office teams need to proactively educate themselves and start allocating small percentage of their capital to this space. They should consult experts and start taking small steps in building up a crypto and digital asset portfolio over a period of time. Further they should also consider investing in a portfolio of blockchain technologies. We are bullish on this space and continue to seek opportunities to invest.
What was your process in professionalising the WAMI Capital family office and what have been the outcomes?
One of my main goals after joining was to institutionalise the family office. To start with we
put together family office investment and operating structure. As a second step, the governance framework and investment policy statement were finalised. We set up the family office board and the investment committee with the intention of running the family office as a listed company with strong governance framework.
We hired professionals for key roles like accounting and reporting, investment research, etc, and we intend to expand the team to get more asset class experts. At the start of the year, we finalise the asset allocation and get feedback on the liquidity requirements of the family. We have also put together a delegation matrix so that we enable quick decision making.
What advice would you offer to non-family executives before they join a family business?
Non-family executives need to build trust and a strong relationship with the family. Further he/she needs to develop a strong communication channel with family board and investment committee. The person has to ensure that he shares his independent views on investment decisions and also introduce the family to new asset classes. The person should also educate family members on various aspects of family wealth planning including succession and wealth transfer. There has to be a focus on risk management and professional discipline while making investment decisions.
What have been the toughest family office decisions you have had to make during the Covid-19 pandemic?
During the Covid pandemic, it was important to not react to all the negative views. After studying the fundamentals of our portfolio positions, especially in equity markets, we decided to hold on to our investments and not engage in any panic selling. We in fact added few core portfolio stocks. On the venture side, we continued to invest especially in sectors which we believed would significantly benefit post-Covid.
(1) The Campden Wealth Global Family Office Report 2019
