Pre-seed VC firm Bee Partners announced today it closed a new $43 million fund.
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The raise marks the San Francisco-based venture firm’s third fund since it was founded in 2009. Bee Partners closed on its first fund, worth $8 million, in 2011. And it closed its second fund, which raised $30 million, in 2014.
Its latest capital has interesting stakeholders. Eleven of Bee’s portfolio company founders are now limited partners, according to the firm, along with a “large Boston-based endowment,” and Industry Ventures, among others.
In announcing the new fund, Bee also disclosed it has promoted advisor Tim Smith to partner.
I hopped on the phone with Bee’s founder, Michael Berolzheimer, this morning and he shared some more details on Bee Partners’ history and future plans.
“We like to use the phrase inception investing,” he said, “since we like to participate in and lead rounds at the inception stage of capital.”
Bee’s average deal size is $750,000 but the firm has put in amounts as small as $150,000, and how much the firm puts in a company is “case dependent,” he said.
“Sometimes founders only need a few hundred thousand dollars to drive a specific model to unlock the next round of resources, including capital.”
Money In, Money Out
Bee Partners has had a couple of impressive exits since its inception starting with TubeMogul, an enterprise software company that went public in 2014 and was acquired by Adobe Systems for $540 million in 2016. Another portfolio company, Buildingconnected, was acquired by Autodesk for $275 million in December 2018. The sale of that construction tech startup provided Bee Partners with a “14x return” on its initial investment, according to Berolzheimer. The firm currently also has “a few pending exits,” he added.
Bee Partners’ second fund is close to fully deployed, with some additional capital left for follow-on investing, according to the firm.
So far, Bee has backed nine companies with its third fund, with two shortly to join the portfolio. The companies already funded by Bee III include Crowdbotics, which aims to allow businesses to build business apps from a matched library of components and a network of on-call experts; InnerPlant, which uses plant-based sensors in an effort to make farming more efficient; and Geosite, a cloud-based platform for aggregating geospatial data.
InnerPlant and Geosite are both led by women founders and CEOs, Berolzheimer notes. In fact, he says, 30 percent of Bee’s portfolio since its inception is made up of female-founded and/or female-led companies.
Another statistic Berolzheimer is proud of is that 65 percent of his firm’s portfolio companies have reached a Series A. (This is a figure that is often called a ‘graduation rate.’)
“Companies that are on the route of venture type of growth are hungry for capital,” he told me. “It’s not easy to move from pre-seed to Series A. They need a product market fit, some traction and a great idea fundable by top tier investors. For our companies to get to that phase is a very important milestone as they turn into foundational businesses.”
Bee operates with a “machines will win” thesis, Berolzheimer said, with the view that “machines will win, and win big.”
Over the years, the definition of pre-seed may have changed. But the need for it has not. Despite Series A, B and C rounds being bigger than ever, there are always going to be startups that need that early-stage funding to get to that point where they can raise bigger rounds. Bee, therefore, should stay busy as a, well, you get the idea.
Illustration: Li-Anne Dias
Photo Courtesy of Bee Partners