When Allan Jones founded his human resources services startup Bambee five years ago, he did not anticipate how difficult it would be to raise venture capital once he had to reach outside of his established professional network.
Subscribe to the Crunchbase Daily
As a serial startup founder and high-level executive at leading Southern California startups — he was previously CMO of ZipRecruiter while in his late 20s, and before that, director of product at Docstoc — Jones was able to raise funding at the early stages from his network, a benefit he acknowledges that many founders do not have.
But when it came to raising Bambee’s Series B, Jones found that his 15 years of business experience did not mesh with the expectations many investors had of a Black founder. In his view, many investors look at Black founders through a homogenous lens: Jones found he faced bias in telling “a story as an operator, not as an up-and-coming whippersnapper.”
“It was clear to me that investors discounted a large amount of what I said about the business and a large amount of what we were capable of as a company, even given our track record,” he said.
Bambee, headquartered in downtown Los Angeles, California, helps small and medium-sized businesses that don’t have a dedicated HR manager with their human resources needs. The market opportunity for the service is the estimated 4.2 million American businesses without an HR manager. (A report by ADP, an HR software and payroll processing company, found that 70 percent of small businesses do not have a dedicated HR expert on staff.)
While the potential market for Bambee is wide open, Jones’ path to venture funding as a Black entrepreneur is statistically narrow: In 2020, less than 1 percent of the record $150 billion in venture capital invested in the U.S. went to Black founders, Crunchbase numbers show. For seed and Series A funding, the proportion to Black-founded companies was less than 2 percent in the U.S. last year.
On raising Bambee’s Series B
Because too few Black founders make it past seed and Series A rounds, those who do are often underestimated.
“When applied to a Black founder running a business growing 300 percent year over year like Bambee, as hard it is to acknowledge, you often feel the underestimation discount when you engage with investors,” Jones said.
“Demonstrating this type of operating prowess from someone that looks like me is unfamiliar,” he added, “and unfamiliarly gets discounted accidentally, even by those with the best of intentions.”
Jones said that for years he didn’t speak about the challenges he faced as a Black entrepreneur because “it made me feel shame. I felt as if this were something I was complaining about that I couldn’t prove and it made me feel weak. But here’s the truth: Bias exists, even in the most progressive investment circles. It makes my job harder.”
Talking about race and the dynamic it plays in funding his business is difficult and doesn’t come naturally to him, Jones admitted. “I operate under the principles of creating as much shareholder value as possible, operating a business to create as much customer value as possible, to create a harmonious workplace, and to create the most effective employees as possible,” he said. “These are the things I think about.”
Bambee’s Series B investment eventually came together via an introduction from its Series A lead investor Nate Redmond at Alpha Edison, to the founder of QED Investors, Nigel Morris. This led to Matthew Risley, a partner at QED, leading Bambee’s $15 million Series B and joining the board. Due to the COVID-19 pandemic, the conversations leading up to the firm’s investment were done entirely over Zoom.
“We look for founders with nontraditional backgrounds. Allan’s talent, hunger and results have shown through over traditional pedigrees — he’s the real deal,” said Risley.
On the market opportunity for Bambee he said, “The HR difficulties that SMBs face—already notoriously complex and cumbersome — were only heightened when we invested in Bambee during the COVID-19 pandemic. But the company’s growth and momentum gave us confidence it was primed for success.”
QED Investors is headquartered in Alexandria, Virginia, and is focused on investing in financial services companies across the U.S., U.K. and Latin America. Alpha Edison and Mucker Capital, who first invested in the seed round, also participated in the Series B.
To date, Bambee has raised a total of $33 million.
Bambee’s market opportunity
Jones said that other investors told him before he launched the business that small business owners don’t care about HR, which did not align with his experience while at ZipRecruiter. There, he saw small business owners who needed support with the soft skills asking for help with the recruiting process.
When he faced pushback from an HR tech executive that “small business owners can’t afford HR,” he responded with, “Let’s change the price.”
Jones felt the solution lay not only with a tech platform, but also in helping businesses address their human needs. The firm has dedicated HR managers who support its customers in two core service arenas: coaching them through how to navigate complex HR issues, and creating policies.
Bambee customers with up to four employees pay $99 per month, while businesses with up to 20 employees pay $199 per month. The company says 99 percent of its customer base is businesses with fewer than 99 employees.
The result was a product that’s industry agnostic. Bambee’s customer base includes highly regulated industries like construction and health care, as well as those that deal with less red tape, like housekeeping and hotel management.
Bambee’s headcount grew last year from 30 to 90 employees and Jones said it aims to have 160 by the end of 2021. The company’s revenue is now in the tens of millions of dollars, according to Jones, and its customer base grew 300 percent last year. He anticipates growing another 300 percent in 2021.
Building trust with customers has been crucial to Bambee’s success, Jones said. The team worked hard at positioning and messaging to build a clear proposition, reflective of Jones’ product and marketing background.
If companies do not trust the service, they won’t use its advice. These business owners have been doing this their entire careers and are “only going to allow you to help them navigate how they perform their day to day functions if they trust you,” he said.
Illustration: Dom Guzman
Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.