The Private Wealth Revolution: Startup Funding’s New Frontier

How Private Wealth is Reshaping the Capital Raising Landscape for Startups

Key Takeaways

  • Fund managers are increasingly turning to private wealth for capital raising due to challenges with institutional investors.
  • The global private capital fundraising is expected to reach $1.6 trillion by 2027, with a CAGR of 3.6%.
  • Large fund managers are leading the way in private wealth capital raising, with KKR, Apollo Global Management, and Blackstone as examples.
  • Regulatory shifts and tech-driven intermediaries are facilitating this shift towards private wealth in capital raising.

The Rise of Private Wealth in Capital Raising

As the traditional routes of raising capital become increasingly challenging, fund managers are turning to the private wealth industry for a much-needed lifeline. A recent report by data provider Preqin highlights the growing trend of tapping into private wealth to secure funding, as institutional investors face economic headwinds and approach their long-term strategic asset allocation targets.

Staying Private, Creating Value

The Preqin report also notes that companies are opting to remain private for longer periods, with a significant portion of value creation potentially happening outside of public markets. Although private capital fundraising is expected to continue growing, the pace will be significantly slower. Preqin forecasts that the global private capital fundraising will reach $1.6 trillion by 2027, with a relatively muted compound annual growth rate (CAGR) of 3.6%—a stark contrast to the 11.7% observed between 2015 and 2021.

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Leading the Charge: The Titans of Private Wealth

Large fund managers are spearheading the private wealth revolution in capital raising. KKR, for instance, has already secured $66 billion from private wealth, with expectations that 30% to 50% of its fundraising will come from this space in the next few years. Apollo Global Management has similar ambitions, aiming to raise $50 billion of retail capital between 2022 and 2026.

Blackstone, another major player, has even established a dedicated private wealth team of 300 employees worldwide, raising an impressive $48 billion in 2022 alone.

Regulatory Shifts and the Role of Technology

This shift towards private wealth is further facilitated by a more favorable global regulatory landscape. Proactive regulatory stances are reassuring fund managers, broadening access for individual investors, and increasing the availability of suitable investment vehicles in the market.

Cameron Joyce, SVP and Deputy Head of Research Insights at Preqin, believes that fund managers have only just begun to tap into the potential of the private wealth space. “We are seeing larger fund managers leverage scale and their brand to raise capital directly from high-net-worth individuals. However, the emergence of tech-driven intermediaries in the space promises to allow a much wider array of fund managers to diversify their investor base,” he added.

Conclusion: A New Frontier for Startup Funding

The private wealth revolution in capital raising is just beginning, and its potential is immense. As fund managers navigate the challenges of securing capital from institutional investors, private wealth offers an alternative route to fuel the next wave of growth for startups and emerging companies. With regulatory support and technological advancements making it easier for fund managers to access this vast pool of capital, the private wealth industry is poised to reshape the landscape of capital raising in the coming years.

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