Steve Brotman kicked off Alpha Partners in 2014 with a groundbreaking idea: partnering with early-stage venture capitalists to help them maintain their ownership stakes as companies progress through later funding stages.
At the start, Alpha’s debut fund was modest, totaling just $10 million.
As the startup scene evolved and companies began staying private longer, the venture capital world came up with new methods to keep their stakes in the most promising startups.
Early-stage firms began raising opportunity funds, which are dedicated pools of capital meant to invest further in their most promising companies.
Additionally, special purpose vehicles (SPVs) emerged, allowing multiple investors to pool their resources for a single company. Alpha Partners’ approach also gained traction in this shifting environment.
Major Milestone
Recently, Alpha Partners made waves with the announcement of their third fund, which is a substantial $153 million—nearly three times the size of their previous fund, which closed at $52 million in 2017.
Despite the challenging process of raising this fund, Brotman emphasized that their strategy of supporting seed-stage VCs in maintaining their ownership is more relevant now than ever.
A Shifting Trend
Opportunity funds have lost some of their appeal following the downturn in the VC market a couple of years ago, and many investors who backed SPVs in 2021 faced some setbacks.
Brotman believes that Alpha Partners offers a reliable alternative. “We are a safe pair of hands,” he remarked.
Alpha Partners typically writes checks ranging from $5 million to $10 million alongside seed investors for companies entering Series B rounds or later.
The firm operates with a swift decision-making process, often within a week or two.
Brotman noted that they adhere to straightforward criteria for investments.
Focus and Strategy
The firm invests primarily in deals led by top-tier VCs and favors companies that have over $10 million in revenue, are growing at 50% annually, are nearing profitability, and are leaders in their sector.
Brotman can quickly assess interest in a potential investment, often within five minutes.
Notable Investments and Partnerships
Some of Alpha Partners’ recent investments include Pearl, an AI platform for dentists in collaboration with Crosscut Ventures; Shield AI, a defense tech startup; and Rad AI, which creates reports for radiologists.
They’ve also teamed up with early-stage venture firms like ARTIS Ventures, Mantis VC, SilverTech Ventures, and Santa Barbara Venture Partners.
Successful Exits and Impact
Alpha Partners has seen significant success with exits including the IPOs of Coursera, Rover, Udemy, Vroom, and Wish.
Their investment in Coupang’s Series G and Series F rounds, alongside Primary Ventures, was particularly notable, delivering a return of about 20 times their investment.
“That’s what really put us on the map,” Brotman said.
Looking Ahead
Despite a decline in later-stage deals, Brotman is confident that Alpha Partners’ strategy of investing in pro-rata rights will remain effective.
“What’s often said about venture capital is ‘it’s not an asset class, it’s an access class,’” Brotman concluded. “We provide our LPs access to the top 1% of all deals out there.”
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