Bain Capital Ventures

Bain Capital Ventures Raises $600 Million (and Another Giant Fund is Born)

It’s starting to happen like clockwork.

Firms are closing new funds almost exactly 24 months to the date from their last fund closing. The newest example? Bain Capital Ventures (BCV), which this morning announced a new, $600 million fund.

It last closed two funds — a $650 million early-stage vehicle, and a $200 million co-investment fund to back maturing BCV investments — in June 2014.

Other venture firms to close fast follow-on funds this year include Accel Partners, Andreessen Horowitz, Founders Fund, Lightspeed Venture Partners, Kleiner Perkins Caufield & Byers and General Catalyst Partners.

BCV is the venture arm of the private equity behemoth Bain Capital, which was founded in 1984. The 15-year-old unit opened its first Bay Area office five years ago, planting a flag in Palo Alto; soon, it’s moving into an even bigger office in San Francisco.

It has eight managing directors — including Ajay Agarwal, who leads its West Coast team — and one partner. According to Agarwal, who joined BCV 13 years ago, it used to be that “90 percent of our team was on the East Coast, in Boston and New York, and 10 percent was here, but it’s about 50/50 at this point.”

BCV primarily backs enterprise-focused software companies, though it invests “opportunistically” in consumer-facing businesses, too, says Agarwal. Two examples are Rent the Runway and Jet.com.

The firm says that half of what it does is early stage and the other half is growth stage. It also says it’s run very separately from Bain Capital, though Agarwal has told us in the past that “those connections into companies [from Bain’s broader network] is massive.” When the robotics company Kiva had “six terms sheets and was trying to determine who to pick,” he’d said, “we introduced the company to the head of distribution at Staples.” It helped seal the deal. (Kiva went on to sell to Amazon in 2012 for $775 million.)

BCV’s newest early-stage fund is slightly smaller than its last. Asked about that, the firm says it targeted what it thinks is the “appropriate fund size for our strategy in the current market environment.”

Asked why it didn’t raise another co-investment vehicle this time around, it says it still has capital to deploy from that $200 million fund it closed it 2014. It also said it isn’t quite done investing its previous early-stage fund.

That’s not uncommon either, these days.

As notes an institutional investor at a university endowment with whom we spoke recently, “Every one of our GPs has come back in the last 12 months, with the exception of one guy. VCs are accelerating their fundraising partly because they have nice marks and want to get ahead of any market cyclicality.” (Read: downturn.)

“Partly, too, they see their GP brethren coming in and they know that [the institutional investors who fund venture firms] only have so many dollars. And you want to be at the front of the queue, not the back of it.”

More here.

Checking the Market’s Temperature with Bain’s Ajay Agarwal

Ajay Agarwal leads the West Coast team for Bain Capital Ventures, which he joined 13 years ago. Because he he has seen some market zigs and zags, we met him for coffee last week to talk about what he’s seeing in the market right now. Our chat has been edited for length.

Bain Capital Ventures opened its first office in the Bay Area five years ago. Now you have an office in Palo Alto, and you’re moving into a bigger office soon in San Francisco. How many of your partners are here now, and how many of your startups are in SF versus south of the city?

It used to be that 90 percent of our team was on the East Coast, in Boston and New York, and 10 percent was here, but it’s about 50/50 at this point. And I’d say 40 percent of our [Bay Area] startups are south. There are a lot of machine learning companies in Sunnyvale and Mountain View and Los Altos, and that’s a big area of interest for us right now.

What’s one new, related investment that might interest readers?

Trooly, whose team comes from LinkedIn. If you think about it, we have all these peer-to-peer marketplaces bringing together strangers, whether they are drivers or babysitters. But the state of the art — background checks — is a flawed process. A lot of information has been digitized, but there are still plenty of counties where, if you’ve committed a crime, they’ll have a physical record alone. So you’d have to send a courier to all of the places where someone has lived to get the information you need, which is expensive.

Meanwhile, Trooly can figure out much more about someone and do it quickly using data science and machine learning. It can figure out any content that has been written by you or about you and whether it’s in any way objectionable. It can verify if the information you send someone is accurate and distinguish between a typo and whether you’re trying to fool someone [on an application]. For every person who fails a background check, we find a person who passed a background check and should not have.

More here.

SendGrid Raises $21 Million to Perfect the Business Email

SendGrid, an email delivery platform that counts Pinterest, Uber and Glassdoor among many others that use its technology to engage with their customers, has just raised $20.7 million in Series C funding led by Bain Capital Ventures. (The company has now raised $48 million altogether.)

Last week, we chatted with SendGrid’s new CEO, Sameer Dholakia, a former key Citrix cloud executive, about what the round says about the five-year-old, Boulder, Co.-based company and the email industry more broadly.

You joined SendGrid roughly six weeks ago. Why the management change?

The company had a terrific CEO, Jim Franklin, who helped grow the company from a couple of million in sales to a company that now has 180,000 customers. But he and the board thought it was the right time to make a transition.

What are you looking to do with this new funding?

One thing we’re looking to do with this Series C is to accelerate our product innovation and new product lines to kind of diversify the business. One of two themes that we’ll push along is big data. You can imagine that [given the scale of our business], there are insights we can glean and actions we can take on behalf of our customers to make them more effective communicators with their users. We want to take a more holistic approach to email marketing.

Can you elaborate?

Not a lot without giving too much away. But as a brand, any customer knows about its users. Their digital fingerprints are significant, from their use of a site, how frequently they open emails, their purchase activity. We want to use that data to create insights that were previously unavailable. At the end of the day, email is an interaction with your user, and you want to customize that interaction based on everything you know.

How many employees does SendGrid have now, and is it profitable?

We don’t share information about our finances, but we’ve grown from 150,000 to 180,000 customers over just the last six months, and we’ve sent 300 billion emails, up from 200 billion eight months ago.

We have 250 employees. We’ve probably added 100 in just the past year, and we’ll be looking to add [roughly another 100] in the next 12 months. It’s a low-touch, go-to-market model, so the size of our direct sales team is minuscule, which is great. It allows us to invest an incredible amount in engineering and technical account mangers and support. A lot of art and science goes into ensuring that our customers’ trusted email makes it to the inbox. We have a double-digit size team that focuses on nothing but catching bad guys on our system and shutting them down.

How much does your service cost?

We have a broad base of customers who might be spending a few hundred dollars a month, all the way to some of our largest customers, and they’re in the range of [spending] many tens of thousands of dollars per month.

New management, new funding. Is it fair to think that you’re eyeing an IPO in the next couple of years?

Certainly, if our growth rates continue at their current clip, we hope to look toward that in the not-too-distant future.

Turning Bain Capital Ventures Into a West Coast Player

Salil Deshpande, who spent seven years as a venture investor with Bay Partners, joined Bain Capital Ventures in March of this year, and he’s been working hard ever since. Deshpande is hoping to replicate his successful track record, with hits that include early investments in Buddy Media (acquired by Salesforce.com last year for $689 million) and the peer-to-peer lender LendingClub (now valued at more than $1.5 billion). Working alongside Bain’s one other West Coast managing director, Ajay Agarwal, in the firm’s Palo Alto office, Deshpande also wants to help Bain establish a stronger presence on the West Coast venture capital scene. I met recently with Deshpande to see how it’s going. Our conversation has been edited for length.

How active is Bain Capital Ventures, and what size bets are you making?

We’ve been very prolific; we’ve closed five deals in the last three months that haven’t been announced. We’ve announced a dozen others, including Aria Systems, a company that lets companies do recurring revenue management. We just led a $40 million round in the company.

As for range, our smallest investment has been $250,000 and our largest has been $55 million in one company.

How much are you investing, and how many partners does Bain Capital Ventures have altogether?

We’re currently investing out of a $660 million fund raised in 2012. We raise a new fund every two-and-a-half years or so, so the pace of investing is high. We have nine managing directors: two here, six in Boston, and one in New York.

Do the nine of you have to agree on every deal?

First, we classify deals as early or growth. With growth deals, everyone who wants to come and do the work is invited. When it comes to early-stage deals, there are just five managing directors [who decide whether or not to move forward]. And the managing director who is sponsoring the deal decides on who the four other people will be.

Don’t partners then choose only those individuals who they think will support a deal?

Not necessarily. I always pick partners who will be critical and have the most knowledge and understanding about the deal. I don’t want to do bad deals. And these are some of the smartest guys I’ve worked with.

Is it hard, trying to establish Bain as a venture entity in this crowded, West Coast market?

There are pros and cons. Bain is a very strong, positive brand. It stands for private equity, large deals, buyouts. It stands for discipline, thoroughness, thoughtfulness, [and] being data-driven. We’re also known for philanthropy work in the Boston community.

The challenge is that the brand stands for something that doesn’t correspond exactly with what we’re trying to do [out] here, where you have to be a little faster [and] a little more responsive to the market. But the nice thing is that things are really working out here, so the brand will catch up.

Do local entrepreneurs understand that Bain Capital Ventures is a venture firm and not a unit of Bain Capital?

This market hasn’t been educated on a couple of things. First, that we exist. [Laughs.] Second, what is Bain Capital trying to accomplish? Sometimes it takes a conversation or two to let people know that we’re just like any other venture fund. We have carry and comp that’s just like other firms. We’re independent – our investment committee is just the nine of us. We have an overlap of limited partners with other Bain Capital funds, but some people incorrectly assume that we’re an evergreen fund with big Bain Capital as a solo LP. We’re like a lot of our peers, except that we happen to be part of a really big franchise.

You’ve said the firm is very data driven. How is that impacting your investing style?

There’s a value placed on being thorough and smart, which isn’t the case in all firms. They look at more metrics. Some [investors] are more intuitive and gunslinging. In the past I’ve relied on domain knowledge and intuition. So I think it’s been a very good education for me to be less intuitive and more thorough. When doing due diligence, I used to talk to a few customers. Now I talk to a dozen.

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Bain Capital Ventures

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