Bain Capital Ventures Raises $600 Million For New Tech Fund

Bain Capital Ventures successfully secured $600 million dollars for a new fund to back tech startups, reports Bloomberg News. The amount of capital raised was disclosed on Friday in Bain Capital Ventures’ filing with the Securities and Exchange Commission. Already this year, venture fundraising has topped $22.5 billion dollars. At this rate, the capital raised by funds in the first half of the year is well positioned to top the $36 million dollars raised in 2015.

It’s a sign that despite the growing hesitation regarding the projected success of tech startups, investors are still willing to put money into these companies. Investors have become more thorough in their examination of tech startups coming to them for funding. The New York Times recently published an article about the noticeable shift in attitude about funding: once upon a time, tech startup founders were flooded with funding offers, but now they have to work for it. The valuation of tech companies are not as steady as they used to be, leading investors to ask questions they used to skip over like “how will your company produce returns?” and “do you have the size to go public?”

This more cautious approach by those who hold the needed capital has precipitated a shift in the balance of power. Entrepreneurs once called most of the shots, holding court over investors who were eager to make a killing by backing the next “unicorn.” At one point, investors were begging startup founders for the opportunity to give them money and provided huge paydays for CEOs before the companies even became successes. Now, it’s the opposite – startup founders have to work hard to convince people that they are worth being one of their ventures. This includes adapting their company to be more attractive to investors and making changes to management.

“Venture capitalists are putting founders through everything short of a proctology exam before they invest,” Vensky Ganesan, a partner at a venture capital firm in Silicon Valley, told the New York Times.

While recent dollar amounts indicate that this year’s fundraising is poised to beat last year, overall the trends still indicate a drop. According to the National Venture Capital Association, funding decreased to $12.1 billion in the first quarter from a year ago – that’s 11 percent. More entrepreneurs are competing for less money. This also means that investors are becoming savvier about setting up terms that provide them with some added protection. These terms include minimum investment gains and guaranteed payouts, and these provisions are slowly growing in popularity.

Bain Capital Ventures’ funding success, however, demonstrates that investors are still willing to put their money in these tech babies in the hopes of enjoying some serious rewards.

“[Limited partners] still want that allocation to VCs in their portfolio as a sliver of high risk, high reward,” said Garrett Black, a senior analyst at PitchBook Data. “We’re seeing successful investors essentially re-raise again and again because they can – they’ve still been successful, especially over the past couple years.”

Bain Capital Ventures is the venture capital branch of Bain Capital. The venture capital arm started in 2001 and since then it has wagered about 200 times on several startups that include Jet.com and DocuSign. The priority for this fund was to downsize compared to earlier heftier funds in order to be able to focus on early stage deals.

“The moment our funds becoming $1 billion or so it become hard to be great early stage investors,” Managing Director Ajay Agarwal told Bloomberg News. Approximately half of this latest fund will go towards A and B rounds. The remainder will be put towards growth-stage deals. Bain is a Boston-based firm that made its move towards Silicon Valley in 2011.

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