The Triangle’s newest venture capital fund, Bull City Venture Partners, plans to announce Monday that it has raised nearly $26 million from investors that it will plow into the next generation of technology startups.
Despite a difficult climate for raising money from institutional investors, wealthy individuals and businesses, the Durham-based venture capital fund exceeded its target by nearly $1 million. Its investors include Red Hat, Cisco, Capitol Broadcasting, NC Innovation Fund and Blue Cross and Blue Shield of North Carolina.
“It’s a very challenging environment,” said Jason Caplain, general partner and co-founder of Bull City. “I think it’s great for venture capitalists to have to go out and do this, because it keeps us all humble because we are out raising capital like everyone else.”
Last year, venture capitalists raised $16.9 billion from investors, down 14 percent compared to 2012, according to the National Venture Capital Association.
Bull City’s funding is welcome news for Triangle entrepreneurs, who frequently complain the region doesn’t have enough venture capital firms making investments in new companies. Venture capitalists prefer, if possible, to invest in startups that are close to home.
Venture capitalists provide startups with the cash they need to develop new products or expand their sales and marketing. The venture capitalists can profit handsomely if these companies go public or are acquired – and they can come up empty if the companies prove to be busts. The overall game plan is to hit enough home runs to more than compensate for the strikeouts.
“Our No. 1 obligation is to produce a great return for our (investors that have) trusted us with their capital,” said co-founder David Jones. “There are a lot of great opportunities both here and throughout the Southeast.”
Bull City raised its funding in two phases. It closed on its initial funding in February 2013 and already has invested in one local company: StepLeader Digital, a Raleigh company that produces mobile apps for local media companies.
Although Bull City is new, Caplain and co-founder David Jones touted their investment track record to prospective investors. Both have been – and continue to be – partners in Southern Capitol Ventures, a Raleigh venture capital firm.
“We don’t live to see another day unless we have put up some good numbers,” Jones said.
Like most venture capitalists, Jones and Caplain declined to specify the returns reaped by investors in Southern Capitol’s two funds, which together raised a total of nearly $20 million from investors. But, Jones noted, three of the eight companies that the first Southern Capitol fund invested in – ChannelAdvisor, Motricity and Square 1 Financial – have gone public.
ChannelAdvisor CEO Scot Wingo invested in Bull City’s fund. He said that although the nearly $26 million raised by Bull City isn’t a huge amount by venture capital standards, he expects the fund’s impact will be “amplified” because Caplain and Jones are skilled at helping their portfolio companies obtain additional investments from out-of-town venture capitalists.
Wingo, whose e-commerce technology company has more than 600 employees, also said the Bull City partners are great to work with.
“Jason and Dave, they roll up their sleeves,” he said. “If we ever needed anything around recruiting or, hey, we’re having a hard time getting into this company or we want to do a partnership with another company, those guys would make it part of their job to go do that for us.”
Southern Capitol, meanwhile, isn’t making investments in new companies. But it continues to work with its portfolio companies and has money in reserve to make follow-up investments as needed.
Caplain and Jones decided to form Bull City after Ben Brooks, founding partner of Southern Capitol, decided he didn’t want to be involved in another fund. Brooks also is director of wealth management at Capital Investment Companies in Raleigh.
“It’s a hard way to make a living,” Brooks said. “You have to do it for the passion. I think Jason and David have the passion. ... I’m a big fan and I really hope they do well.”