Alpha Partners Raises $153 Million Fund with Pro-Rata Rights Strategy
A Game-Changer in Venture Capital
Steve Brotman, the managing partner at Alpha Partners, has been instrumental in shaping the firm’s unique strategy of investing alongside early-stage venture capitalists (VCs) to help preserve their ownership stakes in promising companies. Since its inception in 2014 with a modest $10 million fund, Alpha Partners has evolved to become a leading player in the VC industry.
The Rise of Opportunity Funds and Special Purpose Vehicles
As startups started staying private for longer, the VC industry developed various mechanisms to maintain stakes in their best investments. Many early-stage firms raised opportunity funds, which are dedicated pools of capital specifically designed to double down on their most promising investments. Others relied on special purpose vehicles (SPVs), financial instruments that allow multiple parties to pool their funds and invest in a single company.
Alpha Partners’ approach, however, gained popularity as investors began to seek safer options for preserving ownership stakes. Brotman credits the firm’s strategy of helping seed-stage VCs exercise pro-rata rights – a legal term allowing investors to maintain their percentage ownership of the company – with its success.
The $153 Million Fund
On Monday, Alpha Partners announced its third fund, a significant milestone in the firm’s growth. The new fund stands at an impressive $153 million, nearly three times larger than its second fund of $52 million that closed in 2017. Despite the challenges of raising capital, Brotman asserts that the firm’s strategy is more relevant than ever.
Why Pro-Rata Rights Matter
Opportunity funds have fallen out of favor after the last VC boom ended a couple of years ago, and many investors who backed SPVs in 2021 "got a little bit singed," Brotman said. However, he remains confident that Alpha Partners’ approach is a safe and effective way to invest.
Alpha Partners’ Investment Strategy
The firm typically writes $5 million to $10 million checks alongside seed investors into companies raising Series B rounds or later. With the goal of preserving ownership stakes, Alpha Partners focuses on deals led by top-tier VCs and favors companies with more than $10 million in revenue, growing at 50% annually, close to profitability, and leaders in their category.
"We have only one or two weeks to make a decision" on an investment, Brotman said. For that reason, the firm sticks to simple criteria, which allows for quick decision-making. "Within five minutes, I can tell you whether or not we’re interested," he added.
Recent Investments and Exits
Alpha Partners’ latest investments include Pearl, an AI platform for dentists, backed alongside Crosscut Ventures; defense tech startup Shield AI; and a startup that generates reports for radiologists, Rad AI. The firm has also partnered with early-stage venture firms such as Artis Ventures, Mantis VC, Silvertech Ventures, and Santa Barbara Venture Partners.
The firm’s exits include IPOs of Coursera, Rover, Udemy, Vroom, and Wish. However, it was the investment in Coupang’s Series G and Series F alongside Primary Ventures that really helped Alpha Partners stand out. "We made about 20 times our money," Brotman said. "That’s what really put us on the map."
A Proven Track Record
Alpha Partners’ strategy of investing in pro-rata rights has proven to be a game-changer in venture capital. Although there are now fewer later-stage deals getting done, Brotman is convinced that the firm’s approach will remain relevant.
"What’s often said about venture capital is ‘it’s not an asset class, it’s an access class,’” Brotman said. "We provide our LPs access to the top 1% of all deals out there."
