For decades, buying stock in a hot startup meant being allowed to invest in the funds run by the top VCs. But with the AI boom causing an investment frenzy, more family offices and private wealth are skipping the VC middlemen to get directly onto the cap table.
“Companies are staying private longer, and there are fewer IPOs now than we’ve seen historically,” Mitch Stein, founder of Arena Private Wealth, an investment advisory firm for high-net-worth individuals, told TechCrunch on a recent episode of Equity. “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 co-led a $230 million round into AI chip startup Positron, an investment that earned the midwestern firm a board seat. Stein says that’s part of a deliberate shift away from being passive allocators and toward becoming “active participants in the capital markets.”
The urgency amongst today’s family offices is real.
“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,” Ari Schottenstein, Arena’s head of alternatives, told TechCrunch.
Stein put it more bluntly: “Your biggest risk is not having exposure to AI, not what could happen to your AI investments.”
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The numbers reflect this sentiment. In February, family offices made 41 direct investments into startups, nearly all of them tied to AI. Among those are high-profile names like Laurene Powell Jobs’ Emerson Collective into World Labs, Azim Premji’s family office into Runway, and Eric Schmidt’s Hillspire into Goodfire. According to BNY Wealth research, 83% of family offices say AI is a top strategic priority over the next five years, and more than half have AI exposure through investments.
Some are going further still. A growing number of family offices are incubating their own AI companies, seeding the first several million, taking on operational roles, and deploying the same entrepreneurial instincts that built their wealth in the first place, according to Schottenstein. Jeff Bezos’ decision to serve as CEO of his own robotics company, which raised an initial $6.2 billion last year at a nearly $30 billion valuation, is a high-profile example of the model.
On a smaller scale, Stein pointed to Tyson Tuttle, an Austin-based angel investor and former CEO of Silicon Labs — which agreed to be acquired by Texas Instruments for $7.5 billion. Tuttle co-founded Circuit, a startup using AI to improve manufacturing and distribution, raising a $30 million angel round that includes $5 million from his own family office.
Not everyone coming to the table has founded a company, though. Arena’s team comes from institutional finance, and they argue that rigorous due diligence is what earns them the right to lead rounds.
“We take our time, we’re a very slow ‘yes,’ we say ‘no’ a lot,” Schottenstein said. “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.”
For the Positron deal, that meant working with third-party experts to validate the technology, but also reading the cap table itself as a signal: “If Arm is coming into a deal, we’d like to think your technology is real,” Schottenstein said. Arena also knew Oracle was a major customer, making Positron one of the only AI chips deployed into a hyperscaler not named Nvidia or AMD.
That selectivity shapes how Arena participates once it’s in. Unlike a typical VC spreading risk across a portfolio, Arena makes a small handful of direct deals per year, which changes the stakes entirely. When they’re in, they’re all in; Positron is their one and only AI inference chip investment.
“When we participate in single asset direct deals and only do a small handful every year, our stakes are incredibly high,” Stein said. “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.”
