How Alpha Partners aims to derisk venture investing while delivering fast, friendly, and flexible on-demand growth capital
The challenge
The hero of our story is a specialist micro VC with $4 million in assets under management who met an MBA-drop-out-turned-founder with a great idea. Impressed with the founder’s vision, grit, and determination to fill a market need and build an amazing business, the VC wrote him a check, becoming his first institutional investor.
In its first year, the company booked $10 million in revenue. Over the next four years, the company’s revenue grew to $1 billion, and would eventually increase to $1.7 billion. Meanwhile, the hero of our story, still a micro VC, continued to serve as a director on the company’s board and play a critical role in helping recruit and guide the management team, all while retaining a 6% ownership stake in the business.
Eventually, Sequoia Capital discovers the company and issues a term sheet, leaving insiders with 10 days to pledge to fill their pro rata. This sudden development puts the micro VC in a tricky position. He’s in the middle of raising a new fund and doesn’t have any capital, but he doesn’t want to miss out on an amazing opportunity. That’s when he decides to reach out to Alpha Partners.
At Alpha, our strategy is simple: We help early-stage VCs fully capitalize their pro rata rights in their best follow-on opportunities. In exchange for deal discovery and diligence help, we give them a portion of our carry, which makes being a seed investor more lucrative.
The solution
Alpha moved quickly. Not only did we commit to the $6 million pro rata, we also generated demand for an additional $10 million. With Alpha as his partner, our hero asked for a super pro-rata and together we invested $16 million. As a result, our VC partner increased his ownership stake, remained on the board, and retained his information, voting, and downstream investment rights. A year later, when the company decided to raise another round, we once again helped our VC partner, this time generating a $15 million special purpose vehicle. In both cases, we pride ourselves on being fast, friendly, and flexible when working with our VC partner and the entrepreneur. We’re low touch, don’t take board seats, and are a financial partner, not an operational one.
The outcome
In early 2021, the company IPO’d at a $60 billion valuation. Today, the company is a market leader, employs 80,000 people, and has 650 active patents to defend its leadership. Meanwhile our VC partner remains on the board, manages a category-leading $400 million venture fund, and has been named to the Midas List as one of the top 100 VC investors in the world.
We believe our strategy of providing growth capital for early-stage VCs’ leading companies is a win for everyone. In our view, it provides greater upside for early-stage VCs and friendly growth capital for entrepreneurs. We access investments led by top-tier lead investors in well-priced category-leading companies with IPO potential and metrics. These investments typically have an average duration of 5-7 years, half that of early-stage venture, and with a target impairment rate of less than 10%.
Our sole job at Alpha is to discover highly attractive growth rounds together with our early-stage VC partners, to fully capitalize their positions in their leading companies, and have the opportunity to generate a positive outcome for our VC partners and for entrepreneurs.
To learn more about this deal or about Alpha Partners, get in touch.
The companies identified do not represent all securities purchased, sold, or recommended by the Firm and/or its Funds. It should not be assumed that investments made in the future will be profitable or equal to companies identified herein. Past performance does not guarantee future results. Additional information regarding the Firm’s portfolio may be provided upon request. All information above is as of April 2025.