After two years of hyper-charged transactions and with a mega corpus of $10 billion at its disposal, Alpha Wave has emerged as one of the biggest propellants of the latest tech bull run in India, which is now coming to an end.
The ten-year capital pool built by Alpha Wave, out of New York-based Tiger Global Management, is one of the largest for a technology fund in the world, with India at its center.
Navroz Udwadia, co-founder and partner of Alpha Wave Global, said the fund has great flexibility, giving it “competitive advantages” over others.
“A fund of this scale, tenure flexibility (early stage, late stage) and duration (10 years) gives us significant competitive advantages over our peers,” Udwadia told ET in a rare media interaction. “Thanks to our focus on the public-private market, we felt broad risks rising several months ago and have significantly slowed our investment activity and as a result the vast majority of the fund has yet to be deployed. “, he said of Alpha Wave Ventures. II and the nervousness of technology investors.
Jointly managed by Alpha Wave and Abu Dhabi’s Chimera Capital, the fund’s massive war chest and aggressive moves have caught the attention of domestic startups as it surged through the Covid-19 years, facing d major funding rounds at buzzing internet companies like Cred, Swiggy and Dream11 among many others, as ET detailed in a May 19 report last year.
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According to data from London-based Preqin Pro, last year the fund closed 36 deals compared to 16 and 11 in 2020 and 2019, respectively. So far this year, it has been part of 22 funding rounds.
The Alpha Wave fundraising comes at a time when the tech world is bracing for one of its most challenging phases as investors issue cautionary notes to their portfolio companies – this that startups haven’t seen for a few years now because abundant capital was readily available.
With the slowdown in mind, the fund will seek to make more early-stage bets, much like others like Tiger Global are doing in India, Udwadia said.
“While we are open for business, we will focus on our portfolio first,” he said. “After that, we’ll only look at rare and exceptional companies where we not only see real moats and competitive differentiation, but also high-quality founders available at a reasonable price. By definition, I think we will focus much more on past opportunities.
After seeing chaos unfold in US public markets from December last year, the fund was cautious early on. Typically, private technology valuations lag four to six months behind public markets. Udwadia said Alpha Wave slowed its capital deployment “early and hard”.
“We are fortunate to be in a position where our capital was raised and closed in December 2021 and January 2022…So now we have the opportunity, provided we maintain our discipline, to really look for opportunities to investment in exceptional businesses at reasonable and healthy prices,” he said. “We believe the private market correction is still in its infancy – (there is) a lot more to come, and so , patience is key.”
This is very different from the fund’s approach two years ago, when it pushed the pedal on tech investments in India. Armed with the primary sponsorship of Abu Dhabi’s sovereign wealth funds like the ADQ, 2019 is when the fund started to get aggressive. Udwadia declined to comment on its limited partners (LPs) or sponsors for the new fund.
“Although we do a few Series B rounds, they are almost always when we are already on cap tables. We have firmly entrenched ourselves in the seed and A-series ecosystem, and for us this is incredibly rewarding as we are truly a company and a culture that enjoys building business alongside our founders,” did he declare. “On the other side of the bar is our growth business where we seek exceptional founders running leading companies with competitive moats and a path to a strong unitary economy.”
The strategy of going early is something Alpha Wave will increasingly deploy in the future, Udwadia said. While Alpha Wave Venture II will continue to reduce checks from $50 million to $300 million, more early-stage bets will be needed in India, the United States, Israel and Europe.
In recent months, he has closed early rounds in wealth management firm Wealthy, live video infrastructure startup 100ms and offline-to-online neighborhood store network 1K Kirana, investing in financing rounds below $30 million.
India’s largest market
Alpha Wave has set up teams in Israel and now has ten executives in its Bengaluru outpost, its largest team in the world. It is also present in New York, London and Miami. “Europe, the United States, Israel and India are priority areas,” Udwadia said. “We have expanded our physical and intellectual footprint, hiring not only investment professionals, but also dedicated industry veterans who spend all of their time working with our founders, helping them drive sales, marketing , product market fit, hiring and more.”
Co-founded by New York-based Rick Gerson and Mumbai-born Udwadia, who lives in London, Alpha Wave began life supporting a mix of public and private ventures in 2012 in India. Today, it is more exposed to private companies than to public companies.
“In 2014, my co-founder, with extreme foresight, made the fundamental decision that our rigorous due diligence process, our discipline around behavioral finance, our global relationships and our ability to find off-the-run assets were perfectly suited to the private market investment, and we have carefully expanded our private business,” Udwadia said. “Our private investment business has operated under the Alpha Wave Global brand. a private market-focused investment company with public market investments, it made sense to rebrand ourselves to adopt it through Alpha Wave Global.
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, Alpha Wave (then Falcon) continued to bet on listed companies here. On the private tech side, its first investment was in major Ola in 2014. But the fund was not among the busiest in the market over the next few years, as we detailed in our 19 report. May 2021 – Behind Falcon Edge’s frenetic trading strategy in India.
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“India has had a great run over the past 10 years,” said Udwadia. “It has benefited from the easy policy of global central banks and there have been huge structural improvements in governance and ease of doing business. We are now entering a difficult configuration for India. crude, rising inflation, supply chain shocks, strengthening US dollar. We still respect structural tailwinds, but we are humble and respectful of macro cycles.”
Alpha Wave portfolio companies like Ola and Lenskart were gearing up to tap the public markets this year. However, keeping macro headwinds has mostly stalled their plans.
“We don’t invest like pre-IPO arbitrage. So the IPO window closes and opens as market cycles go up and down, but we don’t time it and count on it while making investments,” Udwadia said. “Being public can benefit some companies, but we avoid situations where it’s necessary to achieve our return on investment (ROI).”