Bull City Venture Partners: Here's what we're investing in

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John West

Wingo enjoys coffee with Jason Caplain of Bull City Ventures and Southern Capitol. Through Southern Capitol, Caplain became an early investor in ChannelAdvisor.

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Lauren K. Ohnesorge

Staff Writer- Triangle Business Journal

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For Jason Caplain, co-founder of Durham venture fund Bull City Venture Partners, fall is travel time. In the past four weeks, he's had three trips to Washington D.C. Next week, he'll be in Silicon Valley, networking with the Facebook and Google folk, all potential contacts for startups in his portfolio.

While BCVP has just one announced investment (StepLeader), there have been other moves that have yet to be made public, he says, although he won't be specific.

Caplain and partner David Jones are still supporting companies in the Southern Capitol Ventures portoflio – although Southern Capitol is no longer making new investments.

Recently, Caplain played a "very, very small role" in an acquisition made by a Southern Capitol portfolio company – Zift's newly announced buy of Marketing Advocate.

But an increasing chunk of time is devoted to deal hunting.

Red Hat and Cisco contributed to Bull City's recent $26 million round, and Caplain has been busily vetting companies that will snag a chunk of the cash.

"We're seeing more activity than we've ever seen in our 14 years of doing this," Caplain says.

BCVP will be investing in the same types of companies in Southern Capitol's portfolio, he says. Southern Capitol typically invests in two to three companies per year, from $30,000 all the way up to $1 million, although a typical deal averages around $750,000. With BCVP, he'd like to invest up to $2 million over time.

Here's what he's specifically looking for:

1. Repeat entrepreneurs. "95 percent of our companies have been that repeat, successful entrepreneur, the Scot (Wingo)s of the world," he says. "They know how to manage companies. They know how to manage problems. They know how to fundraise, so when we get in, we feel like we already have a leg up." On average, Caplain and Jones have known an entrepreneur for at least a year before they write the check.
2. Software/Internet. "Mobile is under that, so is health IT," he says, adding that software is where his contacts are. 80 percent of his companies fall under the software bucket.
3. Southeast/Mid-Atlantic startups. "80 percent of our companies over the past 14 years have been in North Carolina," he says. "I don't know if that will stay true going forward."
4. Early/seed-stage. Seventy percent of companies in his portfolio have been seed- or early-stage (think $30,000-$50,000 per month in revenue). Thirty percent of companies are north of $5 million in revenue.
5. Fair valuation. Caplain says BCVP doesn't have a set equity amount they target in deals, that past equity stakes have ranged from less than one percent to 20 percent. Lower dollar deals have higher equity stakes. "The math has to work out for our fund," he says.

Fund one of Southern Capitol invested in eight companies. Its second fund invested in 11 companies. The third fund, now under the Bull City umbrella, has publicly invested only in StepLeader.

Lauren Ohnesorge covers information technology and entrepreneurship.