Bain Capital Ventures Secures $1.3 Billion in New Funding

Bain Capital Ventures (BCV), the venture capital division of Bain Capital, a private equity firm established 37 years ago, has announced a fresh injection of $1.3 billion in investment capital. This funding is allocated across two distinct funds: a $950 million fund dedicated to seed and Series A investments, and a $350 million fund focused on opportunities within growth-stage companies.

Funding Sources and Allocation

This capital raise represents a slight increase compared to a $1 billion allocation announced in late 2018. The funding base includes traditional investors like endowments and pension funds.

Notably, approximately $130 million of this total stems from contributions made by investors and employees within Bain Capital itself, typically constituting 10% of the overall fund.

Investment Focus: Enterprise Startups

According to partners Sarah Smith and Aaref Hilaly, BCV’s investment strategy will continue to prioritize enterprise startups. The firm aims to engage with these companies at an early stage, establishing substantial ownership positions.

Current significant investments include Attentive, a text message marketing platform currently valued at $2.2 billion, and Redis Labs, an in-memory database company with a $2 billion valuation.

Supporting Emerging Fund Managers

BCV is also actively investing in emerging fund managers, having already provided backing to 50 such entities. This initiative is designed to broaden the range of perspectives and startup ideas considered at the earliest stages of development.

Evolution of BCV’s Strategy

The firm’s evolution began in 2001 on the East Coast, initially concentrating on Series B and later-stage companies. Today, BCV primarily supports startups based on the West Coast, and to a lesser extent, in New York, particularly those in their initial phases.

This shift is highlighted by the firm’s recent investment activity: 42 companies received funding last year, with 37 being either seed-stage or Series A-stage startups, and the “vast majority were pre-revenue.”

Navigating Competitive Landscape

When questioned about the impact of increased competition at later stages, Hilaly acknowledged the intensity across all investment phases. He emphasized that BCV’s team composition – including Hilaly’s prior experience at Sequoia and founding a company, and Smith’s background at Quora and Facebook – positions the firm to be most effective during the crucial company formation stage.

The Need for Substantial Funding

The partners suggest that the large fund size reflects the evolving market dynamics. Firms must now provide entrepreneurs with the capital needed to achieve accelerated growth, and supporting the broader venture ecosystem is becoming increasingly vital, offering a competitive advantage.

Ecosystem Support and Emerging Managers

BCV demonstrates its ecosystem support through investments in emerging seed-fund managers. Backed managers include Bobby Goodlatte of Form Capital (Miami), Maren Bannon of January Ventures (London), Ryan Hoover of Weekend Fund, Scribble Ventures, and Noemis Ventures (New York).

Smith expressed enthusiasm for this program, stating it provides founders with greater choice and fosters diversity within the venture ecosystem, a cause she personally champions.

Diversity and LP Introductions

The newer funds supported by BCV demonstrate a commitment to diversity, with 17% run by Black general partners and 21% by women. BCV also facilitates limited partner introductions for these managers, aiding their establishment and growth, without requesting additional information rights.

Future Investment Areas

BCV’s investment strategy remains thesis-driven, with current areas of interest including application software infrastructure, health tech, e-commerce-enabled enterprise tech, and fintech, notably including crypto.

Existing investments in this space include BlockFi, a crypto lending startup, and Digital Currency Group, the parent company of the Grayscale Bitcoin Trust. BCV has also made investments in “a few tokens,” though this is not the primary focus.

Adapting to a Rapidly Changing Market

BCV is actively writing checks ranging from several hundred thousand dollars to upwards of $100 million. The firm is closely monitoring trends reshaping the venture industry, including the increasing size and speed of deals.

Hilaly observed that the current market conditions are “unprecedented,” yet not entirely surprising. He likened venture capital to startups, emphasizing the need for continuous reinvention every five to ten years due to the dynamic ecosystem.

He concluded that competition necessitates improvement and that maintaining a high level of performance is crucial to attract top-tier founders.