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Alpha Wave: Private market correction still in infancy, much more to come: Alpha Wave’s Navroz Udwadia

It has been a meteoric rise for Falcon Edge (now rebranded as Alpha Wave Global), catapulting the fund into the top league of technology investors locally in a short period of time.

After a hyper busy two years of dealmaking and with a mega $10-billion corpus at its disposal, Alpha Wave has emerged among the biggest propellants of the latest technology bull run in India, which is now coming to an end.

The ten-year pool of capital shored up by Alpha Wave, a second generation Tiger Cub, is among the largest for a technology fund globally, with India at its centre. Tiger Cubs are offshoots of New York-based Tiger Management, which was founded by Julian Robertson in 1980 and has birthed a slew of hedge fund styled firms.

Navroz Udwadia, cofounder and partner at Alpha Wave Global, said the fund enjoys a lot of flexibility giving it “competitive advantages” against others.

“A fund of this scale, flexibility of mandate (early-stage, late-stage) and this duration (10 years) gives us significant competitive advantages versus peers,” Udwadia told ET in a rare media interaction. “Thanks to our public-private market focus, we sensed broad risks rising several months ago and significantly slowed down our investing activity and, therefore, have the vast majority of the fund yet to be deployed,” he said while talking about Alpha Wave Ventures II and the skittishness among 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 rose during the Covid-19 years, fronting large financing rounds in buzzy 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.

Alpha Wave’s fundraise comes at a time when the technology world is bracing for one of its toughest phases as investors issue cautionary notes to their portfolio companies – something that startups haven’t seen for a few years now as abundant capital was easily available.

Keeping the downturn in mind, the fund will look to make more early-stage bets, just the way others like Tiger Global are doing in India, Udwadia said.

“While we are open for business, we are going to be heavily focused on our portfolio first,” he said. “After that, we will look at only the rare, outstanding businesses where we see not only real competitive moats and differentiation, but also high quality founders available at a reasonable price. By definition, I think we will be focused much more on earlier opportunities.”

Having seen the mayhem play out in the US public markets from December of last year, the fund had turned chary early on. Typically, private tech valuations lag behind public markets by four-to-six months. 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 seek out investment opportunities in outstanding companies at reasonable, sane prices,” he said. “We do think the private market correction is still in its infancy – (there is) much more to come, and so, patience is critical.”

Alpha Wave Global venture investments in India_Graphic_ETTECH

going early
This is vastly different from the fund’s approach two years ago when it pushed the pedal on India tech investments. Armed with primary sponsorship from Abu Dhabi’s sovereign wealth funds like ADQ, 2019 is when the fund started getting aggressive. Udwadia declined to comment on his limited partners (LPs) or sponsors for the new fund.

“While we do some Series B rounds, they are almost always when we are already on cap tables. We have firmly entrenched ourselves in the seed and Series A ecosystem, and for us it’s incredibly rewarding in that we genuinely are a firm and a culture that loves business building alongside our founders,” he said. “On the other side of the barbell is our growth business where we look for outstanding founders managing dominant businesses with competitive moats and a path to solid unit economics.”

The strategy of going early is something that Alpha Wave will increasingly deploy going forward, Udwadia said. While Alpha Wave Venture II will continue to cut checks of $50 million to $300 million, it will take more early-stage bets across India, US, Israel, and Europe.

In recent months, it 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 funding rounds below $30 million.

India biggest market
Alpha Wave has set up teams in Israel and now has ten executives in its Bengaluru outpost, its largest team globally. It also has presence in New York, London, and Miami. “Europe, the US, Israel, and India are core focus areas,” Udwadia said. “We have expanded our physical and intellectual footprint, hiring not just investment professionals but dedicated industry veterans who spend all their time working with our founders, helping them drive sales, marketing, product market fit, hiring and more.”

Cofounded by Rick Gerson, who is based in New York, and Mumbai-born Udwadia who lives in London, and Ryan Khoury, Alpha Wave began life by backing a mix of public and private market companies in 2012 in India. Today, it has more exposure to private companies than public ones.

“In 2014, my cofounder, with extreme prescience, made a fundamental decision that our rigorous diligence process, discipline around behavioral finance, global relationships, and ability to source off-the-run assets were strongly suited to private market investing, and we carefully expanded our private business,” Udwadia said. “Our private investing activity has operated under the Alpha Wave Global brand. Today, given that we are now largely a private market-focused investment firm with some public market investing, it made sense to re-brand ourselves to embrace this via Alpha Wave Global.”

Starting its India journey with an investment in

, Alpha Wave (then Falcon) went on to lay bets on publicly listed firms here. On the private tech side, its maiden investment was in ride-hailing major Ola in 2014. But the fund was not among the most active in the market for the next few years, as we detailed in our May 19, 2021 report – Behind Falcon Edge’s strategy of frenetic dealing in India.

Read more at: Behind Falcon Edge’s strategy of frenetic dealmaking in India

“India has had a great run over the last 10 years,” Udwadia said. “It has been a beneficiary of easy global central bank policy and there have been enormous structural improvements in governance and ease of doing business. Now we are going into a tough set up for India. Rising crude prices, rising inflation, supply chain shocks, a strengthening USD. We still respect the structural tailwinds, but we are humble and respectful in the face of macro cycles.”

Alpha Wave’s portfolio firms like Ola and Lenskart were preparing to tap the public markets this year. However, keeping the macro headwinds most have stalled their plans.

“We don’t invest as pre-IPO arbitrages. So, the window for IPOs closes and opens as market cycles go up and down, but we don’t time it or count on it while making investments,” Udwadia said. “Being public can be advantageous to some companies, but we avoid situations where that is required to make our return on investment (ROI).”

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