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Bullpen Capital thinks there’s a lot of need and opportunity investing in the second round of financing after a seed investment, what Union Square Ventures Managing Partner Fred Wilson recently called “the mess.” The new fund is looking to give start-ups the additional support they need as they move from seed round to more traditional funding.
The idea is to make follow-on investments for companies that were often initially founded with seed investments from super angels. The new money allows founders to keep operating without having to decide whether to take larger venture capital investments and the larger expectations they come with. Instead, they can continue to work out their business models and sort out their exit options with the additional funding. It can be an ugly time, Wilson wrote on his blog, as adolescent companies that have built a company are still trying to build a business. And it’s tough for VCs to figure out who needs the extra oomph. But it’s a glaring need, one that Bullpen hopes to address.
Bullpen founder Paul Martino said seed investors often won’t follow on without a new investor and some that would don’t have enough money to do many inside rounds for existing portfolio companies. Meanwhile, he said traditional venture capital funds are often looking to put more money to work than is needed by these particular start-ups. “There’s a hole there where you need another million to $2 million,” said Martino. “Seed people aren’t great and neither is Sand Hill.”
Founded by Martino, co-founder of Aggregate Knowledge; Duncan Davidson, a managing director at VantagePoint Venture Partners and Richard Melmon, co-founder of NetService Ventures Group, Bullpen is close to the finalizing the first $10 million of a $50 million fund. The remainder of the fund will be raised by the end of the year. Bullpen last week made its first investment in Assistly, a cloud-based social CRM service.
Martino said the firm will look to take seats on about half the start-ups, but only those in need of guidance. For those companies with a head of steam, Bullpen is happy to provide just the money. It’s an interesting proposition for Bullpen, trying to be the bridge between seed and traditional VC funding for start-ups. The hard part will be to pick out the winners from some still developing start-ups. But if Bullpen catches on, we might see this become a new target for investors who are quickly finding it’s getting crowded in the seed round.
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