Agni Photiou reveals how family offices are diversifying their investments in a changing world

Over the past decade, family offices have shifted from traditional investments – real estate, oil & gas, etc. – into private equity as limited partners in venture capital firms and as direct investors in startups.

Agni Photiou, Investment Manager of the Nicosia-based family office Exerte Partners, discusses the reasons behind this shift, the office’s strategy and the relative growth of the local startup scene.

About an hour into my conversation with Agni Photiou, she recalls the surreal feeling of hearing startup founders reject her family office’s investment offers.

As vestiges of past bemusement reappear on her face, the soft-spoken investment manager of Exerte Partners explains how, “Back in 2021, it was incredibly challenging for a family office to break into a competitive funding round.”

In the high-stakes world of risk capital, family offices are frequently referred to as “patient capital,” which for some, including Photiou, is a rather unflattering and misleading label, as it perpetuates the mistaken belief that family offices are passive investors, content to wait indefinitely for returns. “We were being told that a lot,” she says.

Exerte Partners was founded in 2014. Photiou notes that its founder wants to keep a low profile but reveals that he generated wealth by scaling local companies to the global stage in traditional sectors and technology. As such, in its infancy, the office focused exclusively on later-stage companies – it was all about leveraging existing networks and legacy projects. She crossed paths with the founder in 2018 and doesn’t mind admitting that, before joining the office, venture capital wasn’t on her radar; in fact, she didn’t even know what venture interest was.

With a background in chemical engineering, she spent years in boutique business consultancies, including a stint at the UCLan Cyprus Institute of Social Sciences – hardly the typical resumé of an investment manager! The mysterious founder, though, juxtaposed her go-getter attitude with her CV and chose her, leading Photiou into a whole new world, one in which she found herself increasingly enamoured with novel technologies and innovative concepts.

“Once you see what’s out there and how fast things move, it changes you. It gives you knowledge and then you can transfer that into your decisions and the companies you work with, helping them advance.” You need a strong gut instinct, too, she adds, since you can’t always be confident that your decisions are right.

Since joining the office in 2018, she has become a mentor in the MassChallenge Switzerland accelerator and sits on the selection committee for the most recent Geneva-based Tech Tour South East mentoring programme in Athens, paying it forward while finding interesting startups before their valuation shoots through the roof.

As it transpired, Photiou’s arrival marked a strategic pivot for Exerte Partners; together with the founder, she built a strategy to invest in early-stage startups. The beginning was rough, she recalls, as the focus was on the Cyprus and Greece markets, which were still quite undercooked at the time and so, to build confidence and an understanding of the early-stage game, they invested in venture capital funds.

“We don’t like to fail – nobody does. Learn from failure? Yes, that is necessary to avoid repeating mistakes. Still, as my boss always says, in this office, we don’t celebrate failure,” Photiou says, highlighting yet another distinction between family offices and VCs, especially those that cast a wide net in the hopes of landing an outlier.

Family offices haven’t always had a taste for startups and the headaches caused by quantifying the unquantifiable. In Europe, where old money reigns supreme, the families behind many offices have roots in traditional businesses spanning decades, even centuries. However, the information age of the new millennium has seen wealth increasingly generated through technology.

According to a PwC report corroborated by PitchBook data, family offices have followed a rising trend in startup investing since 2012, culminating in a significant surge in 2021. In 2022, they contributed to over a third of the capital invested in startups globally. “If the strategy is to preserve wealth,” Photiou notes, “a family office will go for lower-risk investments, although traditional investments like real estate are not always safe, but if the goal is growth, they will go for riskier investments.”

It also depends on the particular risk appetite of the individual, what they want to achieve personally and as a legacy – some people who’ve led exciting lives might seek investments that offer the same kind of thrill.

Exerte Partners now has a diversified portfolio with a 50/50 split in public and private equity, both as a Limited Partner in VC firms and through direct startup investments – it has allocated several millions, Photiou notes, and plans to continue doing so. The portfolio is that of a generalist: investments range from funds focusing on sustainable food, like Lever VC (it supports protein innovation startups) and startups in the same segment such as ZYA (converts sugar into fibre) and Proteme (coating solutions for extended shelf life) to fintech, wellness and enterprise solutions.

“In our region, we are industry agnostic and opportunistic but we have certain passions with a global outlook,” she explains, explaining the interest in the sustainable food industry. “We are financially driven but we aim to make investments that have a tangible impact on people’s lives. That’s why we seek solutions that address immediate market needs.” The family office prioritises founders willing to put in the effort and having monetisable Intellectual Property (IP) is a clear signal of dedication. On the software side, where IP is less common, a founder’s hustle is crucial to winning the office’s favour; much as happened with Photiou’s arrival at Exerte Partners, the people behind the technology matter as much as the technology itself.

Does the office help beyond financing?

“We don’t sell this to startups,” she says but quickly clarifies that, “At the early stages, because we can’t be experts in everything, we seek out those who are and build the necessary network – we try to be proactive. We tell the founders that if they need anything, they can ask us. We’ve done a lot for our portfolio companies, especially regarding IP, tax and introductions to key contacts, to help our investments thrive as much as possible.”

The recent back-to-back global crises, which started with the pandemic feeding supply chain distortions and record-high inflation – Photiou describes them as “an avalanche” – have undoubtedly shaken the world of risk capital. According to a KPMG report, venture capital investment sank globally from US$531.4 billion across 51,894 deals in 2022 to $344 billion across 37,808 deals in 2023 amidst macroeconomic challenges – such a drop has not been observed since 2016. This environment has exposed several problematic aspects of the venture capital industry, especially the inflated valuations of startups following the VC funding boom of the previous years.

Photiou recognises that plenty of money was deployed based on false assumptions, inflating stock market valuations that eventually spilled over into the private side. “By 2020-21, VCs were pouring money into the market and over-funding companies. This is what startups wanted and those that didn’t were often convinced by VCs to get overfunded,” she says. For family offices, their public portfolios suffered when the bubble burst while private companies struggled to sell, as high inflation was eroding the purchasing power of consumers. “You get affected from different sides because you don’t have a mandate to implement a single specific strategy,” she explains. It was not all doom and gloom, though. As valuations and hype dialled down, VCs sat on heaps of dry powder awaiting a market rebound, choosing to reinvest in their existing portfolios instead. Sifting the wheat from the chaff, they separated lifestyle entrepreneurs from those truly committed to building impactful products. Naturally, the downturn in dealmaking also opened up better opportunities for family offices, as startups needed to raise money from somewhere – even in the form of mischaracterised ‘patient capital.’ Agni Photiou takes a moment to gather her thoughts before saying, “The industry operated in a specific way: you raised money from VCs and that was that. But things are changing now, and founders are seeking capital from alternative sources. Also, some founders felt that certain VCs weren’t really helpful, so they wanted something different.” With VCs reluctant to lead rounds these days, startups have been extending their fundraising time horizons, which allows family offices the chance to conduct thorough due diligence without being rushed into an investment.

It’s not only the fundraising scene that’s evolving; the local startup market has also undergone a complete transformation since Exerte Partners began its early-stage strategy in 2018. For Photiou, this shift is due to increased exposure, knowledge transfer and a relative influx of risk capital willing to take bets on new markets – though she firmly reiterates that, as a family office, it is not in the business of bet-taking. Founders have also started to grasp the limitations of the local market more acutely. Six years ago, Photiou would often encounter founders that exclusively targeted the Cypriot market, which was too small to generate revenues enticing investors and not even representative enough for product testing in some cases. She also observed founders clutching their ideas tightly, fearing someone might steal them.

“Nobody has time to steal your idea!” she says with mixture of amusement and astonishment. “But there’s been a lot of improvement and now certain startups are standing out from the pack.” One of these is Theramir, a Limassol-based biotech company focused on developing and commercialising miRNA-

based cancer therapeutics and diagnostics. The office has joined the startup’s latest funding round, representing its latest overall (and first-early stage) in Cyprus since the launch of the new strategy and marking its foray into biopharma.

“Startups here were never really sexy for the VC community and they are underserved,” Photiou notes, as we wrap up our conversation with a reference to where the local scene is heading. In her characteristic soft tone, she emphasises that every ecosystem needs an ambassador – a success story that can generate a cascading effect of better deals and startups.

“When I was in Estonia, everybody was talking about Bolt because it is their ambassador and it gives others the confidence that they can do it too. These things take time; nothing happens overnight,” she says. Indeed, what people usually consider an “overnight success” is, in reality, nothing more than people refusing to give up against all the odds until the market attaches value. In Photiou’s experience, all you need is more exposure.

(Original photo by TASPHO)

(This interview first appeared in the July edition of GOLD magazine. Click here to view it.)