Alpha Partners Founder and Managing Partner Steve Brotman
Steve Brotman is an entrepreneur, investor and the founder and Managing Partner of US-based Alpha Partners. Prior to Alpha Partners, he co-founded Greenhill SAVP and Silicon Alley Venture Partners. He invested in 30 portfolio companies from these two funds.
His current company, Alpha Partners, is a global growth equity firm that co-invests with early-stage VCs to help them leverage unused pro-rata rights. The firm seeks partners in Asia Pacific for future opportunities amid broader pressures among VCs and startups.
e27 spoke with Brotman, Founder and Managing Partner of Alpha Partners, about the company’s plans in Asia and opportunities and trends in the tech industry.
Edited excerpts:
Can you share the story of the motivation behind co-investing with early-stage VCs to leverage unused pro-rata rights?
Alpha Partners seeks to be different from traditional VC and private equity (PE) firms. Our model is built on collaboration rather than competition.
Early-stage VCs often uncover exceptional opportunities but may lack sufficient capital to exercise their pro-rata rights in subsequent funding rounds fully. These rights are crucial as they allow investors to maintain their ownership stake in a company during new funding rounds.
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Our strategy to co-invest with early-stage VCs serves several purposes. Firstly, it enables us to access high-potential, later-stage deals that we might otherwise miss. By utilising the unused pro-rata rights of our VC partners, we can invest in companies at a growth stage, which aligns with our investment thesis focused on accelerating private technology companies.
Secondly, this approach benefits our VC partners. It gives them the capital to maintain a significant stake in the companies they have nurtured early. It allows them to monetise this opportunity as we share profits with them. This collaboration strengthens our relationships with these VCs, fostering a network of mutual support and shared success.
We aim to generate not just financial returns but also to contribute positively to the broader entrepreneurial ecosystem. By supporting early-stage VCs, we indirectly aid a diverse range of startups and entrepreneurs, fueling innovation and growth in the technology sector.
Given your interest in Asia Pacific, what specific trends or opportunities are you observing, and how does Alpha Partners plan to navigate and capitalise on them? What are your focus verticals/sectors in APAC, and why?
My interest in APAC stems from its rapidly evolving technology landscape and burgeoning entrepreneurial spirit. This region presents unique trends and opportunities that Alpha Partners keenly observes and aims to capitalise on.
One of the most striking trends is the rise of digital economies, particularly in Southeast Asia. The region has seen a surge in digital services, e-commerce, fintech, and a growing adoption of mobile technologies. This shift is due to technological advancements and a young, tech-savvy population quickly embracing digital solutions.
Another key trend is the increasing investment in artificial intelligence and machine learning across various sectors. Countries like China and South Korea are making significant strides in these areas, which opens up many opportunities for innovative applications in industries such as healthcare, education, and smart cities.
As for focus verticals, Alpha Partners is particularly interested in sectors where technology can create a significant impact and where the region has shown a strong growth trajectory. These include e-commerce and digital marketplaces, fintech, health tech, and edutech.
We plan to leverage our strong network of relationships with VCs and industry experts in the region. Our approach is to partner with local players with deep market insights and understand their respective markets’ unique challenges and opportunities. This strategy provides us access to promising investment opportunities and enables us to add value through our expertise in scaling businesses.
Do you plan to raise and set up a separate fund for APAC? Can you share details?
Though I can’t disclose details about a separate APAC fund, I can say that we see a strategic advantage in creating a dedicated APAC fund. However, doing this would require thorough market analysis and alignment with our core investment philosophy of driving value and fostering innovation in the technology sector. We are in learning and exploring mode and are open to discussing leveraging our model in the region with local partners.
In the context of broader industry trends, how do you see the current landscape for startups and VCs, and what challenges and opportunities do you anticipate shortly?
I see a dynamic and evolving environment shaped by several key trends, challenges, as well as significant opportunities.
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One of the most prominent trends is the continued digital transformation across various industries. This has led to a surge in demand for technology-driven solutions in AI, machine learning, fintech, healthtech, and edtech. Startups operating in these domains are poised for substantial growth, given their potential to disrupt traditional industries and create new market opportunities.
Another trend is the globalisation of the startup ecosystem. We’re seeing innovative companies emerging from diverse geographical locations, not just the traditional tech hubs. This global spread presents a broader array of investment opportunities for VCs.
However, the landscape faces some challenges. One significant hurdle is the increased competition for funding among startups. With more companies vying for investment, differentiating oneself and demonstrating a clear value proposition is more crucial than ever. The current economic climate can impact fundraising efforts and valuations.
In the context of VC, the challenge lies in identifying and investing in startups that not only have innovative solutions but also a sustainable business model and the potential for scalability. The emphasis has shifted from merely funding the “next big idea” to making strategic investments in companies that show a clear path to profitability and long-term growth.
Looking ahead, we will continue to emphasise technology-driven solutions, particularly those that address pressing global issues like healthcare, education, and environmental sustainability. There will also be a growing focus on startups that leverage data and analytics to drive decision-making and operational efficiency.
Another opportunity lies in fostering more inclusive and diverse startup ecosystems. There’s increasing recognition of the value brought by founders and teams from varied backgrounds, which can drive innovation and open up new markets.
With your background in entrepreneurship and investing, how do you balance a company’s strategic vision with the financial considerations as an investor?
As an investor, balancing a company’s strategic vision with financial considerations is a nuanced process that requires a deep understanding of both sides of the equation.
Throughout my entrepreneurial journey, I’ve learned the importance of a clear and compelling strategic vision. This vision drives a company’s direction, innovation, and, ultimately, its success. It’s essential for inspiring the team, attracting customers, and differentiating the company in the market.
However, as an entrepreneur, I learned that vision without a viable financial plan is unsustainable. It’s crucial to align the strategic vision with practical, achievable financial goals.
As an investor, my approach involves a thorough analysis of a potential investment’s strategic and financial aspects. On the strategic front, I look for companies with a robust and unique value proposition, a scalable business model, and the potential to impact their industry significantly. This involves understanding the market dynamics, the company’s competitive edge, and the feasibility of its long-term goals.
On the financial side, my focus is on evaluating the company’s financial health and potential for sustainable growth and profitability. This includes analysing revenue trends, cash flow, cost structures, and the overall scalability of the business model. As an investor, it’s crucial to ensure that the company’s financials are robust enough to support its strategic ambitions.
The key to balancing these aspects is open communication and alignment of interests. As an investor, I engage with the company’s leadership to understand their vision and discuss how it aligns with practical financial considerations. It’s about finding a middle ground where the company’s aspirations are supported by a realistic and achievable financial strategy.
How does Alpha Partners approach risk management and strategic investment planning considering the global economic landscape?
We focus on diversification, not just in terms of geography but also across sectors and stages of company growth. This diversification strategy helps mitigate the impact of market volatility and sector-specific downturns.
We also place a strong emphasis on due diligence. This involves a comprehensive analysis of potential investments, including a deep dive into their financial health, business models, market potential, competitive landscape, and management team quality. Understanding these elements helps us assess each investment’s inherent risks and potential returns.
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In terms of strategic investment planning, we maintain a long-term perspective. While we remain agile to capitalise on immediate opportunities, we focus on sustainable growth and value creation over time. This means investing in companies that show short-term potential and have a clear path to long-term success and scalability.
Lastly, we focus on proven industry sectors and recession-resilient ones. Sectors kike healthtech, edtech, govtech, and cyber security all will do well regardless of the economic climate.
What emerging technologies or industries do you find most intriguing, and how does Alpha Partners position itself to explore opportunities in these areas?
I find several emerging technologies and industries particularly intriguing, and our firm is strategically positioned to explore opportunities in these areas.
Firstly, AI is at the forefront of technological innovation. Its potential to transform industries is immense, and it can drive efficiencies, enable new business models, and create value in unprecedented ways. We are actively looking for companies leveraging AI and ML innovatively, particularly those with a clear application and a path to commercialisation.
Another area of interest is fintech, especially with the rise of blockchain and cryptocurrency. How these technologies reshape financial transactions, asset management, and even traditional banking structures is fascinating. We are keen on exploring companies that are not just using blockchain as a buzzword but are genuinely creating disruptive solutions in the financial sector. So far, we have not seen anything of interest, but as we are not beyond the boom-bust part of the hype cycle, it’s an excellent idea not to write off this technology.
Healthtech is also a sector that holds significant promise. With the world’s focus on healthcare due to recent global events, innovations in telemedicine, personalised medicine, and medical data analytics are areas we are closely monitoring. We believe these technologies can potentially significantly improve healthcare delivery and patient outcomes.
In terms of positioning, this is where we leverage our extensive network of over 900 VC relationships to identify and access cutting-edge opportunities in these sectors. This network is invaluable for gaining insights into emerging trends and technologies.
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