Steve Brotman in Crain Currency on the access problem facing family offices going direct into AI

In a Crain Currency feature published today, reporter Marcus Baram examines the growing number of family offices that have stopped writing checks into venture funds and started investing in AI companies directly. Alpha Partners Managing Partner Steve Brotman was the story's most quoted source, and his case is that the impulse behind the shift is sound while the execution is harder than most families expect.

The frustration driving it is legitimate. Paying 2-and-20 to sit in a blind pool for more than a decade is a difficult proposition when the AI companies generating the returns stay private and the liquidity keeps failing to arrive. Families are right, Brotman argued, to want more control and clearer visibility into what they actually own.

Access is where that runs into a wall. The best AI rounds are oversubscribed before most investors hear about them, and allocation runs through pro rata rights and relationships built over decades. A family office seeing a hot AI deal for the first time with no warm connection attached should start by asking who else passed. "In venture, the deals that find you are rarely the ones you want to find," Brotman said.

He declined to call the bubble, and said he would be skeptical of anyone who claims to know. What holds across cycles is that the winning investors are the ones with the best filters, and that discipline on entry price compounds quietly even when it looks boring.

At Alpha Partners, this is the problem our strategy was built around. We provide the capital that lets our network of more than 1,000 early-stage VC partners exercise the pro rata rights in their best companies, which puts co-investors alongside lead investors who have already done the diligence and hold the relationships that determine allocation. Families get the transparency and control they are after while keeping the seat at the table.

Going direct solves the fee problem. It does not solve the access problem, and access is what determines who owns the companies that define this cycle.

Read the full article here.