Bain Capital Ventures (BCV), the venture arm of the 37-year-old private equity firm Bain Capital, announced this morning that it has $1.3 billion more smackers to invest across two funds, a $950 million fund for seed and Series A deals and a $350 million fund for growth-stage opportunities. That amount is up slightly from late 2018, when the outfit announced $1 billion across two funds.
While the outfit is backed by all the usual suspects, including endowments and pension funds, it’s worth noting that around $130 million of that capital comes from investors and other employees inside of Bain, whose contributions typically make up 10% of a fund. (Investors at other firms like Sequoia are big investors in their funds, too.)
More important, of course, is where the capital will be spent. According to partners Sarah Smith and Aaref Hilaly, the focus remains very much on enterprise startups, where the team likes to jump in early and build up a big position. (Some of its biggest bets in terms of dollars invested right now include the text message marketing company Attentive, currently valued at $2.2 billion, and the in-memory database company Redis Labs, valued at $2 billion.)
Interestingly, BCV is also investing directly in a lot of emerging managers, 50 of whom BCV has already backed in order improve the diversity of ideas and startups that it gets to see at the earliest stages.
It’s all part of the firm’s continuing evolution, says the outfit, which got its start in 2001 on the East Coast and was designed initially to fund Series B and older companies but today funds mostly West Coast- and, to a smaller degree, New York-based startups that are just getting off the ground.
To underscore the shift, says Hilaly, BCV wrote checks to 42 companies last year and 37 of them were either seed-stage or Series A-stage startups and the “vast majority were pre-revenue.”
Asked if competition at the later-stage drove the firm to seek out more nascent deals, Hilaly notes that competition at every stage is intense right now and argues that BCV’s current team composition — Hilaly spent seven years at Sequoia and earlier founded a company himself; Smith spent a collective seven years at Quora and Facebook, for example — makes it most impactful at the company formation stage, when founders are still getting the fundamentals down.
As for why the organization needs such a massive fund to back such young companies, it’s a reflection of the changing market, both partners suggest. Not only do firms need to be able to provide the capital that entrepreneurs need to grow at a faster clip than ever before, but it’s becoming increasingly important for venture outfits to support the ecosystem — including as a competitive edge.
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For some firms, that support comes in the form of scout programs that empower operators and founders to write checks to friends who are starting companies.
For BCV, it means committing an undisclosed but “material” amount of capital to emerging seed-fund managers. So far among the managers it has backed is Bobby Goodlatte of Form Capital of Miami, with whom we talked recently (see below); Maren Bannon of London-based January Ventures; Ryan Hoover of Weekend Fund; Scribble Ventures, run in part by husband-and-wife duo Elizabeth and Kevin Weil; and Noemis Ventures in New York.
Smith says that BCV is “really excited about this program because it’s great for founders, who have more choice than ever as they’re getting started. It’s also helping on-ramp a broader group of investors into the venture ecosystem, which is something I’m personally passionate about as I care about diversity of thought.”
Those newer funds — 17% of which are run by Black general partners and 21% of which are run by women — also help BCV to stay atop the latest enterprise trends, she adds, saying that in addition to checks, BCV helps make limited partner introductions for managers to help get them off the ground. (BCV does not ask for any information rights beyond what the firms’ other limited partners receive.)
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As for where BCV will be funneling the rest of its new capital, Smith says that BCV has always been — and remains — thesis driven, and that much of what interests the firm right now is application software infrastructure, health tech investing, e-commerce-enabled enterprise tech and fintech, including crypto, which has become a growing area of intrigue.
Some of the firm’s related deals include the crypto lending startup BlockFi and Digital Currency Group, the parent company behind the popular Grayscale Bitcoin Trust. BCV has also invested in “a few tokens,” says Hilaly, “but that’s not the major focus,” he adds.
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In the meantime, BCV — which is writing checks as small as several hundred thousand dollars to upwards of $100 million in companies — is also keeping an eye on the trends that continue to reshape the venture industry, including, right now, ever bigger and faster deals.
“It’s unprecedented,” observes Hilaly of what’s happening in the market, even while he’s not surprised by it. “My general feeling is that venture is not so unlike startups, and every firm has to just reinvent itself every five or 10 years because the ecosystem around it is changing so much.
“You can complain about competition,” he continues, “but the reality is competition just forces you to be better.” Certainly, he says, “You have to you have to be on your game to a greater extent than ever before.” Otherwise, there’s “just no way a sensible founder would pick you.”
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