Introduction

Steve Brotman started Alpha Partners in 2014 with a novel idea at the time: investing alongside early-stage venture capitalists to help preserve their ownership in promising companies as they transitioned to later funding rounds. The firm’s first fund was just $10 million, but over the years, it has grown significantly.

Alpha’s Growth

Alpha Partners announced its third fund, which raised $153 million, nearly three times larger than its second fund of $52 million that closed in 2017. Despite the challenges of raising capital, Brotman emphasized that this fund was a "brutal slog." However, he highlighted Alpha’s strategy of helping seed-stage VCs exercise pro-rata rights as more relevant than ever.

The Decline of Opportunity Funds

Opportunity funds, which were once popular for preserving investors’ stakes in high-potential companies, have fallen out of favor. Brotman explained that many investors who backed SPVs (special purpose vehicles) in 2021 “got a little bit singed” during the last VC boom. He emphasized Alpha’s role as a safer alternative.

The Alpha Partners Model

Alpha Partners typically invests between $5 million and $10 million alongside seed investors into companies raising Series B rounds or later. Brotman noted that the firm makes decisions in just a few weeks, so it sticks to “simple” criteria. These include investments led by top-tier VCs, targeting companies with over $10 million in revenue, growing at 50% annually, close to profitability, and those leading their category.

Key Investment Criteria

Within five minutes, Brotman can determine if Alpha is interested in a company. The firm’s latest investments include Pearl, an AI platform for dentists backed by Crosscut Ventures; Shield AI, a defense tech startup; and Rad AI, a startup that generates reports for radiologists. Early-stage venture firms such as Artis Ventures, Mantis VC, Silvertech Ventures, and Santa Barbara Venture Partners have partnered with Alpha on these investments.

Achievements

Alpha Partners’ exits have been successful, with companies like Coursera, Udemy, Vroom, and Wish exiting Alpha’s portfolio. Notably, Coupang raised $1 billion from the firm, further solidifying its reputation as a key player in preserving ownership stakes for early-stage VCs.

Conclusion

Steve Brotman’s Alpha Partners has revolutionized the way early-stage VCs preserve their ownership interests by investing alongside them at critical junctures. With a focus on strategic growth and preservation, Alpha Partners continues to be a trusted partner for seed-stage companies.