Family offices are reevaluating taking passive roles as limited partners. They want to take back control of how their money gets invested. In the new world they are also taking up the roles of investment management, risk management for preserving family unity and effective management of wealth transition. Apparently, they are increasingly getting vary of venture capital as an asset class. In the next six years their direct investments will exceed hedge funds, based on Citi Private Bank’s report consisting of data gathered from 340 family offices all around the world. Probably an unbelievable metric, 99% of these offices are expected to make positive or neutral returns on their investments. Particularly those offices managing half a billion dollars or more, are making 40-50% allocation into alternative investments. This allocation percentage is similar to what is seen with endowments. Even in the world of venture capital world, the venture partners present the deal flow to their limited partners after a minimum due diligence is made. But family offices want to take matters into their own hands.
Just as family offices are trying to play hedge funds, they are also trying to play a VC by directly investing into target companies. In the ever-evolving landscape of investment strategies, family offices and high-net-worth individuals are constantly seeking innovative approaches to maximize returns while managing risk. As traditional venture capital investments become increasingly volatile, a new kind of company needs a spotlight, offering a unique alternative that combines the best of both worlds: Azle Technologies Inc.
Holding structure
Azle Technologies Inc., or simply Azle, claims to have a fascinating hybrid between a disciplined investor and a startup. Their innovative structure allows Azle to hold partial to full ownership in a portfolio of companies, with a laser focus on hard tech and deep tech sectors. What probably sets Azle apart is its crazy ambition to emulate the success of legendary holding companies like Berkshire Hathaway or Constellation Software, while maintaining a hands-on approach to operational excellence.
Azle brings a rare combination of skills to make vetted investment decisions and provide valuable guidance to their portfolio companies. Apparently, their executive team brings a wealth of experience from aerospace, hardware, semiconductors and software background, besides technical management and financial experience. By focusing on lucrative sectors that traditional VCs generally shy away from, or outright fail in their investment management of certain sectors. Most venture funds see longer development cycles and higher capital requirements to turn the invention into a profitable enterprise, where Azle sees an opportunity.
They claim their business system is derived from Model based systems engineering. Azle’s secret sauce is its proprietary Azle Systems Engineering Enterprise (ASEE) process. Most funds don’t take active role in deploying a process to run a startup. For building operational excellence in each of its subsidiaries, Azle takes an active role in their companies. The company says there is no hands-off approach when the stakes are high and futuristic technology is involved.
Family offices can access a diversified portfolio of hard tech and deep tech companies without the burden of directly managing individual investments. While it remains unclear whether Azle offers investors opportunities to influence allocations through agreements or board seats, they benefit significantly from the expertise of Azle’s executive team. This collective body of knowledge is particularly advantageous for navigating complex technological landscapes and conducting thorough due diligence on new acquisitions.
The long-term investment strategy employed by Azle resonates strongly with family offices’ extended time horizons. By prioritizing the creation of sustainable value over rapid exits, Azle positions itself as an attractive option. As Azle expands its portfolio, the potential for synergies between its subsidiaries grows. This cross-pollination of ideas and technologies across different ventures could spark innovative breakthroughs, ultimately enhancing the overall value of Azle’s investments.
Their current portfolio includes the themes in, IoT or internet of things, enterprise intelligence platforms, electronics measurements instruments, precision technologies, drones and enablement technologies, advanced aerial mobility and trade specific marketplaces.
Potential risks
While Azle presents an intriguing investment opportunity, potential investors should consider the following:
- As a newcomer in the investment space, Azle’s business model has yet to demonstrate long-term viability, requiring investors to anticipate potential fluctuations and uncertainties.
- Azle’s emphasis on hard tech and deep tech sectors may lead to concentration risk, especially if these industries persistently struggle to deliver strong returns.
- Being a private entity, investments in Azle are likely to be less liquid compared to publicly traded options, limiting investors’ ability to exit quickly.
- The success of Azle is significantly tied to the management team’s ability to effectively select investments and implement operational improvements across its portfolio companies
Conclusion
For family offices and high-net-worth individuals exploring alternatives to traditional venture capital, Azle offers a distinctive investment opportunity. By merging the diversification advantages of a holding company with the growth potential of cutting-edge technology investments, Azle provides a compelling value proposition in today’s evolving investment landscape. While such investments carry inherent risks, Azle enables family offices to gain exposure to transformative technologies while benefiting from the active management and expertise of its dedicated team. With frontier technologies continuously reshaping industries and creating new opportunities, Azle’s targeted approach and proprietary process position it to capitalize on its strategic convictions.
