As private markets develop, family offices are turning to direct investments in growth-stage startups, allocating more than 40% of their portfolios to private assets. This can offer greater control and potentially higher returns, but also comes with heightened risks. Without a proper framework in place, superficial evaluations often lead to misalignment, operational failures, and can incur substantial financial losses. With market volatility persisting and investor scrutiny intensifying, family offices must prioritise comprehensive processes to thrive in 2026.

The positives of direct investing are clear. It allows family offices to bypass traditional fund fees and tailor deals that align more closely with their strategies. However, common hazards remain. Understaffing, over-reliance on hype, and inadequate risk assessments can derail even the most promising opportunities. Data from recent surveys indicates that only about 50% of family offices with direct investing experience achieve consistent success, underscoring the need for robust governance and expert involvement.

The historic surge of venture capital funding and investing in 2020 to 2021 showed what happens when capital moves faster than the base understanding of an asset. In this period, many firms were raised at inflated valuations before their operating model was proven, and the reset that followed forced investors to raise funds at lower valuations. This reduced the value of assets, which permanently impaired outcomes.

That risk is amplified in private markets, where capital is illiquid (can’t be turned into cash quickly), and decisions cannot be easily reversed. In this context, relying on momentum or brand recognition is not a viable strategy in itself.

At Arbra Partners, we encourage clients to build portfolios with intention, not just through exposure to the most popular names. That means prioritising execution-led businesses and highlighting disciplined entry points for companies or investors to supply opportunities that can compound through cycles, rather than relying on short-term sentiment or goals.

This requires an approach that goes beyond models and headline metrics. Robust due diligence, customer references, competitor perspectives, and technical validation help identify what is real, what is fragile, and what is being underestimated.

Late and growth-stage investing tends to be the best environment for this type of research. These companies have real customers, measurable retention, observable unit economics, and enough operating history to validate whether growth is durable or artificial. Underwriting reality, not just potential, is precisely what long-term, illiquid private market exposure demands.

Late and growth-stage investing often represents the optimal area for family offices and ultra-high-net-worth individuals (UHNWIs) to operate in. Unlike traditional venture funds, which may spread bets across more than 100 early stage companies in pursuit of 100x outcomes, family offices often prefer companies with established traction, clearer revenue streams, and a more visible path to scaling. This reduces the probability of permanent loss while retaining a meaningful upside.

Peter Thiel, the founder of PayPal and Palantir Technologies, recently noted in an interview that scaling dynamics tend to favour larger entities. He argued that moving from $100 billion to $1 trillion may be easier than many assume, and that each 10x step can become more achievable as distribution, leverage, and market positioning strengthen. This insight reinforces why later-stage opportunities often align better with family office strategies, enabling exposure to scale-up potential without taking the same existential risk profile as early stage venture.

There is a correct and methodical way to approach these investments. Simply allocating capital into established names will not create consistent outcomes. Success demands deliberate thought, careful portfolio construction, and significant due diligence of the type Arbra Partners practises. This includes engaging with industry experts, customers, competitors, and former employees to gain unfiltered insight into operational realities, market positioning, and risk factors that financial models alone cannot capture.

For example, speaking with authorities in a sector can help assess whether an engineering team is customer-centric, able to innovate quickly, and capable of solving the smaller but critical issues that often drive retention. Conversations with engineers from incumbents can reveal whether a startup requires materially more capital, regulatory navigation, or technical depth than anticipated, while former employees can surface cultural fragility or execution gaps. Customer feedback can then validate whether product-market fit is real and repeatable, rather than reported. Finally, competitor perspectives often highlight differentiation more honestly than internal narratives.

This qualitative depth is increasingly essential in a market where valuation remains elevated, and execution risk is frequently underestimated.

Moreover, there is a pressing need for diversified exposure within late and growth-stage private markets. Rather than concentrating capital into a handful of deals, family offices and UHNWIs are better served by building portfolios across sectors such as AI infrastructure, industrial technology, biotech, and sustainable energy. This reduces sector-specific drawdowns and improves resilience across cycles. Surveys suggest family offices plan to maintain or increase private market exposure into 2026, but doing so responsibly requires a repeatable diligence framework and access to a broad set of vetted opportunities.

To navigate these challenges, family offices should adopt hybrid teams that combine internal underwriting with external specialists. This includes performing robust checks across operations, cybersecurity, legal structure, and valuation discipline. Engaging accountants, lawyers, and sector experts early strengthens investment decision-making, particularly when evaluating founder-market fit, intellectual property defensibility, scalability constraints, and regulatory exposure.

As direct exposure continues to grow in 2026, the family offices that succeed will be those that treat diligence as a core capability, not a checkbox. A structured process, supported by the right external partners, improves selection quality and reduces the risk of permanent capital loss.

In 2026’s private markets, the direct investing boom offers family offices and UHNWIs a pathway to meaningful wealth creation, particularly in the late and growth-stage areas where traction meets scalability. Without such rigorous due diligence DNA that emphasises expert-driven insight, disciplined selection, and diversified exposure, failure remains the likely outcome.

By prioritising substance above sentiment and committing to a repeatable underwriting process, investors can not only withstand volatility but achieve their growth ambitions through it, building resilient portfolios that protect generational wealth in an increasingly complex private market landscape.

At Arbra Partners we utilise our deep expertise, tenacious research practices and our experience of working across numerous sectors, including private markets, to plot and secure the best strategies and investment opportunities for numerous firms, investors and institutions. We use primary research and cross-sector insights to go the extra mile and engage directly with the operators and touchpoints that will give senior stakeholders the information – and the advantage – to build out their portfolios and investments with.