Bullpen Capital, a venture firm that specializes in investing in companies that have already secured seed funding and are looking to scale, has closed its third fund with a total of $75 million. The firm’s founder, Paul Martino, spoke at the annual Post-Seed Conference in San Francisco about the unique challenges and opportunities for investors and founders in this stage of business.
A Niche Market
Bullpen Capital focuses on companies that have already demonstrated traction but are often deemed too early for traditional venture capital firms. These companies typically require additional funding to reach the next level, but they may not be large enough or profitable enough to attract investment from larger VCs. By filling this gap in the market, Bullpen Capital has carved out a niche for itself and has seen success with past investments in companies such as Classy, FanDuel, AirMap, and Ipsy.
The Post-Seed Stage: A Crucial Time for Startups
According to Martino, most U.S. startups in the post-seed stage are looking for $2 million to $4.5 million in financing before they can pitch venture firms to raise a Series A round or live off their profits. However, this stage of funding is often overlooked by traditional VCs, who may be too focused on earlier-stage deals or more established companies.
Rising Costs and Changing Trends
Martino noted that the cost of doing business has increased in certain categories, such as virtual reality, augmented reality, and artificial intelligence. However, Bullpen Capital focuses on startups in categories that have fallen out of favor with VCs and the startup ecosystem. By investing in these areas, the firm is able to identify promising companies before they become more crowded and expensive.
Identifying the Next Big Thing
Martino explained that Bullpen Capital’s investment strategy involves identifying companies that are well outside of the Silicon Valley community and have a "chip on their shoulders," meaning that they’re doing well fundamentally but aren’t being courted by other VCs and partners. The firm also looks for startups that are attracting an outsized share of customers before copycats show up.
Limited Partners
Bullpen Capital’s new fund includes several large, institutional investors, including Greenspring and Oberlin College. However, Martino did not have permission to name all the limited partners in the fund. The presence of these institutional investors may be a sign that other microfunds and venture firms are beginning to take notice of the post-seed stage as a potential area for investment.
The Future of Venture Capital
Martino’s comments suggest that the future of venture capital may involve more focus on the post-seed stage. As traditional VCs continue to invest in earlier-stage deals, Bullpen Capital and other firms like it are filling the gap with a unique value proposition: helping companies scale and prepare for the next level of growth.
Past Investments
Bullpen Capital’s past investments have ranged across various industries, including:
- Classy: A platform that helps nonprofits raise funds online and manage their donor relationships.
- FanDuel: A pioneering daily fantasy sports site that merged with DraftKings in 2021.
- AirMap: A company making airspace management systems for lower airspace where consumer and commercial drones will fly.
- Ipsy: A subscription commerce player in bath and beauty.
Conclusion
Bullpen Capital’s third fund brings a total of $75 million to the table, providing a significant boost to the firm’s investment activities. With its focus on post-seed stage deals, Bullpen Capital is well-positioned to help companies scale and prepare for the next level of growth. As the venture capital landscape continues to evolve, it will be interesting to see how firms like Bullpen Capital adapt and innovate in response to changing market trends.
