Billionaire family offices including Ray Dalio's have flocked to SandboxAQ.
However, these private investment firms of the ultra-rich are still betting on AI startups, according to private wealth intelligence platform Fintrx. SandboxAQ CEO Jack Hidary told CNBC why family offices, including those of Ray Dalio and Jim Breyer, are keen on AI.
A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide to the high net worth investor and consumer.Last month, single-family offices made 40 direct investments, down 31% month to month, according to data provided exclusively to CNBC by Fintrx, a private wealth intelligence platform. April's tally also represents a 47% year-over-year decline. However, artificial intelligence-related startups are still garnering attention from family offices, accounting for half of last month's direct deals. In early April, quantitative AI firm SandboxAQ finalized its Series E round of $450 million after upsizing the fundraise twice due to investor demand, CEO Jack Hidary told CNBC. SandboxAQ raised some $300 million last December from investors including a host of billionaires and their family offices, such as venture capitalistand Two Sigma co-founder David Siegel. The round was extended this spring, raising an additional $150 million from Bridgewater founder Ray Dalio's family office and a cohort including"These are very value-added family offices because they know the world of tech well. They know the world of finance well," Hidary said. "These are experienced executives and entrepreneurs who lend a hand in advising us and are active in doing so." SandboxAQ uses AI and quantum technology to make large-scale predictions and statistical analysis that it markets to a variety of industries, like companies doing drug discovery, cybersecurity, navigation or financial modeling. Its technology analyzes large numerical datasets to make predictive AI models. Hidary, a serial tech entrepreneur, said professionally managed family offices and large institutions have developed a greater appetite in the past six or seven years for deep-tech startups that cater to businesses. "They used to see deep tech as something they didn't touch. It's not their purview. They didn't make their money, you know, doing that," he said. "But now it turns out they understand that actually it's lower risk to invest in deep moat companies." "What they realize, after years of investing in consumer-oriented tech — tech that helps you manage your pet's food or something like that — it sounds great. It builds up a lot of users quickly, but it's easily commoditized," he said.The Inside Wealth newsletter by Robert Frank is your weekly guide to high-net-worth investors and the industries that serve them. Family offices are often quicker to make investment decisions than traditional institutional investors, but some want to have deep technical knowledge before they hand over funds, Hidary said. For instance, Breyer met with Hidary four or five times to discuss relevant chapters of two books authored by Hidary. As for Dalio, his investment followed years of discussions with Hidary that initially started in Abu Dhabi, United Arab Emirates, about the impact of AI on the economy. In initial conversations with investors, Hidary says he assesses whether they have the patience for a long horizon. "You don't want a family office that's here to just flip a burger, right? And that would not be a good fit for us," he said. "We're looking to build a global company in the top echelon of tech companies. And I think people are attracted to that ambition. They're attracted to that focus, but it's not for every family office."
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