Bain Venture Capital Arm Seeks $625 Million for Technology Fund

May 19, 2014 9:58 am ET

May 19 (Bloomberg) -- Bain Capital LLC’s venture arm is seeking $625 million for its latest fund as the industry enjoys the best market for initial public offerings since the late 1990s dot-com bubble when co-founder Mitt Romney was helping lead the private-equity firm.

Bain Capital Venture Partners 2014 LP will mostly invest in infrastructure software, health-care technology and other technology companies that serve businesses in North America, according to marketing documents viewed by Bloomberg News. It can also back consumer-focused firms, including those in e- commerce.

Venture funding reached $10 billion in the first quarter, the most since the second quarter of 2001, according to researcher CB Insights. Bain joins firms including Norwest Venture Partners and Menlo Ventures in gathering funds after a slew of lucrative IPOs. China’s largest e-commerce company Alibaba Group Holding Ltd. filed this month for what may be the biggest IPO ever in the U.S.

Charlyn Lusk, a spokeswoman for Bain at Stanton Public Relations & Marketing, declined to comment on the firm’s fundraising plans.

Bain Capital, which was founded in 1984 by Bain & Co. partners including Romney to invest in early-stage companies and then later managed leveraged buyouts, oversaw more than $70 billion at the end of last year, including credit funds. The firm this year raised $7.3 billion for its latest buyout fund.

Bain Capital started a dedicated venture arm in 2000 and the unit raised its first fund the following year. The team’s West Coast office in Palo Alto, California, is led by Ajay Agarwal, who focuses on early-stage software, mobile and Internet investing.

Fund Terms

For the latest fund, the firm will charge a 2.5 percent management fee and take a 25 percent cut of profits, known as carried interest, according to the documents. Bain Capital Venture Partners will commit at least 10 percent of the fund’s total capital. The firm is also raising a pool of capital to invest alongside the main fund and in larger deals.

The firm is seeking a pool similar in size to the venture arm’s last fund, which gathered $601 million in 2012.

The firm’s 2009 fund was producing a multiple of 1.3 times invested capital and a 12 percent net internal rate of return as of Dec. 31, according to the documents. Its biggest realized profit has come from Liazon Corp., a private benefits exchange company that earned the pool more than five times its money. Rent the Runway, the online dress and accessories provider, is poised to be the biggest win for the fund, valued at more than six times the original investment as of Dec. 31.

LinkedIn Multiple

A 2007 fund was producing a 1.9 multiple and a 15 percent return rate at the end of the year, the document shows. The fund made more than five times its money on an investment in professional networking site operator LinkedIn Corp., which went public in 2011.

Its best realized return has come from a 2008 investment in AppAssure Software, which made the fund almost 12 times its money when it was purchased by Dell Inc. four years later. Unrealized stakes in Rapid7, a security and compliance software company, and BloomReach Inc. are valued at multiples of 13 and 12, respectively.

Over the past few years, Bain’s venture business has added several managing directors. Salil Deshpande joined in 2013 from Bay Partners, where he was a general partner. Matt Harris, co- founder and managing general partner of Village Ventures, came aboard in 2012. Todd MacLean, who previously worked at Accel Partners, rejoined Bain the same year.

Romney, the 2012 Republican Presidential candidate, took a leave of absence in 1999 to run the Salt Lake City Winter Olympics and then announced his departure from the firm in 2001 as he planned to run for governor of Massachusetts.