Historically, accessing shares in promising startups typically involved investing through leading venture capital funds. However, the current AI investment surge is compelling a growing number of family offices and private wealth investors to bypass traditional VC intermediaries and secure direct equity stakes.
Mitch Stein, founder of Arena Private Wealth—an advisory firm for high-net-worth individuals—explained on a recent TechCrunch Equity episode that “Companies are staying private longer, and there are fewer IPOs now than we’ve seen historically.” He emphasized that “A lot of money is being made well before companies go public, and right now the private markets are dominated by a lot of these AI names. The family offices who are allocating [directly into AI startups] are right on.”
Arena recently demonstrated this strategy by co-leading a $230 million funding round for the AI chip startup Positron, an investment that secured a board seat for the Midwestern firm. Stein views this as a purposeful evolution from passive capital allocation to becoming “active participants in the capital markets.”
The sense of urgency among contemporary family offices regarding these direct investments is palpable.
Ari Schottenstein, Arena’s head of alternatives, articulated this urgency to TechCrunch, stating, “The world’s AI infrastructure is being built now, so you’re either going to get in early and have an opportunity to do more primary investing…and really build a portfolio, or you’re going to miss it and be taking random bets.”
Stein underscored this point even more pointedly, asserting: “Your biggest risk is not having exposure to AI, not what could happen to your AI investments.”
This perspective is substantiated by recent data: in February alone, family offices executed 41 direct startup investments, with almost all of them focused on AI. Notable examples include Laurene Powell Jobs’s Emerson Collective investing in World Labs, Azim Premji’s family office backing Runway, and Eric Schmidt’s Hillspire supporting Goodfire. Furthermore, BNY Wealth research indicates that 83% of family offices identify AI as a top strategic priority for the coming five years, with over half already holding AI-related investments.
Some family offices are taking an even more proactive stance. Schottenstein notes that an increasing number are actively incubating their own AI ventures, providing initial multi-million dollar seed funding, assuming operational responsibilities, and leveraging the entrepreneurial acumen that originally generated their wealth. A prominent illustration of this approach is Jeff Bezos’s role as CEO of his robotics company, which secured an initial $6.2 billion last year at a valuation approaching $30 billion.
On a more modest scale, Stein highlighted Tyson Tuttle, an Austin-based angel investor and former CEO of Silicon Labs (which was acquired by Texas Instruments for $7.5 billion). Tuttle co-founded Circuit, a startup leveraging AI for manufacturing and distribution enhancements, raising a $30 million angel round that included a $5 million investment from his personal family office.
However, not all new participants in this direct investment trend have prior company founder experience. Arena’s team, for instance, hails from institutional finance, asserting that their rigorous due diligence process is what qualifies them to lead funding rounds.
Schottenstein elaborated on their approach: “We take our time, we’re a very slow ‘yes,’ we say ‘no’ a lot. We definitely invest in the sources and experts and people necessary to make sure that a company is what it says it is and can do what it says it will do.”
In the case of the Positron investment, this involved collaborating with third-party experts to validate the technology. Additionally, the composition of the cap table served as a key indicator, with Schottenstein remarking, “If Arm is coming into a deal, we’d like to think your technology is real.” Arena was also aware of Oracle's significant customer status, positioning Positron as one of the rare AI chips deployed into a hyperscaler that isn't from Nvidia or AMD.
This high degree of selectivity dictates Arena’s engagement once an investment is made. Diverging from the typical VC model of diversifying risk across a broad portfolio, Arena executes only a select few direct deals annually, fundamentally altering the investment stakes. When they commit, they commit fully; Positron, for example, represents their sole investment in an AI inference chip.
Stein concluded by emphasizing the gravity of their approach: “When we participate in single asset direct deals and only do a small handful every year, our stakes are incredibly high. We are not managing portfolio-level returns. We don’t model in failure on a single asset transaction. We are taking a tremendous amount of risk with concentrated client capital. We’re taking on reputational risk as a firm. We’re allocating a tremendous amount of time and resources. There’s an alignment there that founders appreciate.”
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