Family offices still bet on AI and health care even as deals slow down

A version of this article originally appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high-net-worth investors and consumers. become a member to receive future editions straight to your inbox.

Deals may have picked up on Wall Street, but investment firms for the ultra-rich are still treading cautiously. Family offices made 54 direct investments in September, down 46% year-over-year, according to data provided exclusively to CNBC by private wealth platform Fintrx.

Despite the broader slowdown, billionaire family offices are still investing in mega rounds of high-flying startups. Companies last month Amazon founder Jeff Bezos and former Google CEO Eric Schmidt led a $300 million seed round for Periodic Labs. Founded by former OpenAI and DeepMind researchers, Periodic Labs aims to automate scientific research with AI-powered robots that conduct laboratory experiments.

Healthcare and biotechnology startups also still attract the attention of high-profile investors. Primary care clinic group Harbor Health has raised $130 million from Michael Dell’s DFO Management, Breyer Capital and Martin Ventures. The initiative’s chief medical officer, Dr. Clay Johnston was formerly dean of the medical school named after Dell at the University of Texas at Austin. Most of the funds will be used to expand Harbor’s insurance offerings and open more clinics.

The slowdown in private capital has also left room for family offices to make opportunistic bets. In September, Birmingham, Michigan-based Mitchell Family Office acquired luxury beauty retailer Cos Bar for an undisclosed amount. Principal Mark Mitchell told CNBC that his offer was accepted within a month. He said Cos Bar had been held by a private equity owner for nine years and was the last deal in his fund.

Mitchell founded the family office in 2015 after selling a majority stake in home health care business US Medical Management. Centene. He later said that he left with a total of $325 million.

Mitchell, who made his fortune in healthcare, primarily invests in sectors ranging from inpatient adolescent psychiatric hospitals to bone marrow collection technology.

But he said MFO was increasingly investing in other industries to meet the Mitchell family’s needs and interests. Cos Bar’s high-end locations will be used to showcase AI-powered smart mirrors developed by husband Colby’s startup, Swan Beauty. The mirrors, which retail for $695, analyze skin tone to recommend beauty products and can also be used to virtually try on makeup.

“I would say the last few investments we’ve made have been less, let’s say, ‘patriarchal Mark Mitchell decisions’ and more second-generation decisions,” he said.

Mitchell, 60, has five children aged 6 to 30. His adult son and daughter founded an automotive business and clothing company, respectively, owned by MFO. She said involving her children in the family office helps them stay motivated to succeed.

“My son is the first one in and the last one out every day and is actively looking at real estate investments. My daughter actively manages her company 14 hours a day, seven days a week,” he said. “In my experience, sometimes these adult kids, the second generation of a wealthy family, don’t grind after college. Mine are really grinders, which sets a good example for their younger siblings.”

In April, Mitchell purchased the AFC Toronto women’s soccer team. He said he initially invested because he was looking for a hobby, but later became more interested in the team’s operations. It also brought the family together. Mitchell said his daughter is considering buying a women’s soccer team, his younger sons have started playing soccer, and his entire family attends games.

“Going back to the multigenerational thing, it was great that the family focused on it and was really interested in it,” he said.