Bull City Venture Partners isn’t showy in the least. Each year, the 20-year-old generalist venture firm invests in two to four firms. It mostly invests in founders who have already gone around the block at least once, capturing them as early as possible in their new endeavor. And it primarily invests in East Coast businesses between Philadelphia and Atlanta from its headquarters in Durham, North Carolina. Investors appear to like its methodical approach. According to business founder Jason Caplain, the firm recently closed on $50 million in capital commitments for its fourth fund, more than tripling the size of its previous fund, which was already a significant step up from the firm’s first two funds ($15 million and $5 million, respectively).
It’s hardly the type of explosive growth that industry watchers have come to expect in recent years. That, according to Caplain, is part of the objective. “We’re driven by carry,” he says, alluding to a venture firm’s earnings from successful bets. “We’re not asset gatherers” who rely on management fees to make a living. Bull City appears to be holding its own, having filled a gap in the market when it first arrived. Indeed, Caplain, a Massachusetts native who came to Durham in the late 1990s to work for Red Hat, claims that one of the reasons he decided to start a venture business was because Red Hat had resorted to investors in California (Benchmark and Greylock) before going public in 1999.
“The idea was to create a fund where future Red Hats could turn for funding,” says Caplain, who raised money over the years from Red Hat’s former CEO, COO, head of engineering, and director of business development. (Before being bought by IBM in 2019, Red Hat contributed to Bull City’s prior fund.) Today, the firm is mostly focused on local businesses, with more of them being founded by workers of area behemoths such as Epic Games and SAS Institute, a 40-year-old analytics behemoth that is rumored to be seeking to go public by 2024.
Caplain, who manages the business with veteran partner David Jones (they also brought on a younger member, Michael Lee, last autumn), says the partnership is now more broadly focused on the East Coast and that it invests even further afield 10% of the time. Because of a prior association with its founder, Tyler Davis, the company co-led the seed round of LaunchNotes, a Bay Area-based startup, in 2020. According to Caplain, the technique is working. While Bull City hasn’t had a portfolio company go public in a long time — the multichannel commerce company ChannelAdvisor (who’s IPO was in 2013) and Motricity (which went public in 2010 and was folded into another outfit several years later after a lackluster performance) are two recent examples — a slew of portfolio companies have been acquired in recent years.
Spoonflower, a Durham-based e-commerce site, was sold to Shutterfly for an estimated $225 million in August. Bull City, according to Caplain, had a solid return on its $117.5 million acquisition of performance management firm VividCortex by SolarWinds in 2019. Based on that momentum, Bull City isn’t exactly pushing towards additional startups. Despite the fact that the business has recently quadrupled the size of its previous fund, the objective is to continue investing between $250,000 and $2 million in startups, primarily in firms that generate at least $25,000 per month in revenue. It will also occasionally slip a check into a well-established bootstrapped business. It may also summon a special purpose vehicle on rare occasions. (This has happened twice, according to Caplain.)
The one constant, according to Caplain, is a founding team “that makes me want to quit my job and go work there,” as well as a need for — and desire for — the firm’s assistance. “Because we can’t differentiate based on check size,” he adds, “our competitive advantage is to be a wonderful partner and to guarantee that the founders we deal with have a fantastic experience with us.” We want them to suggest others to us and come back to us when they establish their next business.”
