Steve Brotman founded Alpha Partners in 2014 with a then-novel idea: to invest alongside venture capitalists and retain ownership of promising companies as they move into later-stage funding rounds. Alpha's first fund was just $10 million.
But as startups stayed private for longer, the venture capital industry devised a variety of mechanisms to keep a stake in the most promising startups. Many early-stage companies raised opportunity funds, dedicated pools of capital designed specifically to multiply the most promising investments. Others relied on special purpose vehicles (SPVs), financial instruments that allow multiple parties to pool their money to invest in a single company. Alpha Partners' approach also gained some popularity.
Alpha Partners on Monday announced a $153 million third fund, nearly triple the size of its $52 million second fund that closed in 2017.
Brotman told TechCrunch that the fundraise was a “brutal undertaking,” but that Alpha Partners' strategy of helping seed-stage VCs exercise pro rata rights – a legal term that allows investors to retain a percentage of ownership in the company – is more important than ever.
Opportunity funds have fallen out of popularity since the last venture capital boom ended several years ago, and many investors who put money into SPVs “got burned a bit” in 2021, he said. “We're a safe haven,” he said.
Steve Brotman, Managing Partner at Alpha Partners Image courtesy of Alpha Partners /
Alpha Partners typically writes checks of $5 million to $10 million, working with seed investors, to companies raising Series B rounds or beyond.
“We only have a week or two to make an investment decision,” Brotman says, so the company sticks to its “simple” criteria.
Alpha Partners invests primarily in deals led by top-tier venture capital firms, prioritizing companies with revenues exceeding $10 million, growing at 50% annually, approaching profitability and positioning themselves as leaders in their fields.
“We can tell you within five minutes whether we're interested,” Brotman said.
The firm's most recent investments include Pearl, an AI platform for dentists in which Alpha co-backed with Crosscut Ventures, defense technology startup Shield AI, and RadAI, a startup that creates reports for radiologists.
Early stage venture firms in investment partnership with Alpha include ARTIS Ventures, Mantis VC, SilverTech Ventures and Santa Barbara Venture Partners.
Alpha Partners' exits include the IPOs of Coursera, Rover, Udemy, Bloom and Wish. But it was its investment in Coupan's Series G and Series F, alongside Primary Ventures, that really put the firm on the map. “We made about 20 times our investment,” Brotman says. “That's what really put us on the map.”
Despite the current decline in late-stage deals, Brotman believes Alpha Partners’ pro rata rights investment strategy will continue.
“The saying goes about venture capital: 'It's not an asset class, it's an access class,'” Brotman says. “We're giving LPs access to the top 1% of all deals.”