It’s not so unusual for a major private equity firm to delve into the venture capital business. You don’t see it go the other way quite as often.
This is why it’s intriguing that the 50-year-old VC firm Bessemer Venture Partners is getting into the buyout business. The firm started setting up its new private equity practice last year, hiring Rob Arditi from Norwest Venture Partners to get the ball rolling. Last month, BVP Forge, as Bessemer is calling it, closed its first fund at $780 million. There is—naturally—cross-contamination between Forge and Bessemer’s venture capital businesses, but BVP Forge operates independently, with its own investment team.
“This is a totally different asset class,” Arditi says, noting that there will be no overlap between the buyout business and Bessemer’s growth funds. Forge will be eyeing “self-sustaining” businesses, as he puts it—those that don’t need outside capital to run and are growing revenue by around 10-50%. Most of the businesses that work with BVP Forge will be in search of liquidity, Arditi says.
So why launch into a new line of business? For Bessemer, Forge is a natural extension to its pre-existing venture practice, according to Arditi, who says that Bessemer’s investment team was coming across great companies that didn’t have the growth rates of their venture risk-reward profile. Arditi is tying this buyout structure into the firm’s pre-existing venture branding, network, and industry insights—in hopes that the structure will resonate with the companies they want to acquire.
Forge will move much slower than Bessemer proper, as it will operate like a traditional private equity firm, planning to hold 10-12 businesses for around five years, depending on the market environment. The bets will be larger, and due diligence will take longer, with BVP Forge planning to ink about three to five deals a year, Arditi says. It will largely be taking majority positions in the companies it invests in, though it may also take “significant minority” stakes as well. Arditi notes that the fund will be focused on businesses in sectors such as health care access, supply chain collaboration, or technology for city- and county-level governments.
The fund has yet to make its first investments. Right now, Arditi has been focused on building out the team, which is now comprised of 12 people—including Arditi, partner Navid Oreizy, operating partner Brian Cramer, and principal Maren Hopkins—though he says the team is “actively looking” at options right now and are in “various stages of discussions.”
Arditi, Oreizy, and Cramer all need to sign off on a deal before they write the check. “We want to sign off as a team on the deals that we embark on,” Arditi says.
LPs have bought in, including Horsley Bridge Partners, MetLife Investment Management, Mousse Partners, Rice University, and StepStone Group, who are all investors in Bessemer’s new buyout fund. Now to see whether Bessemer’s would-be portfolio companies want in.
DTC is dead… Or at least, that’s what many VCs are saying about it. My colleague Alexandra Sternlicht delves into how the direct-to-consumer (DTC) strategy that earned brands huge followings and helped them bypass big retailers isn’t the standalone business model it once was. “We’re a whole decade past where pursuing the DTC model was at the forefront of innovation and retail, or was interesting on its own,” Forerunner’s Nicole Johnson tells Sternlicht. You can read the full story here.
A correction to yesterday’s newsletter… Cruise vehicles have driven customers more than 400,000 miles with no driver, not 300. I regret the error.
Thanks for reading,
Submit a deal for the Term Sheet newsletter here.
Jackson Fordyce curated the deals section of today’s newsletter.
– Puttshack, a Chicago-based mini golf company, raised $150 million in funding from funds managed by BlackRock and Promethean Investments.
– Soli Organic, a Rockingham, Va.-based soil-based, indoor farming company, raised $124.3 million in Series D funding. CDPQ and Movendo Capital co-led the round and were joined by investors inclduding B.V., S2G Ventures, Cascade Asset Management Company, and XPV Water Partners.
– DataGrail, a San Francisco-based data privacy platform, raised $45 million in Series C funding. Third Point Ventures led the round and was joined by investors including Thomson Reuters Ventures, Sixty Degree Capital, Felicis Ventures, Operator Collective, Next47, Cloud Apps Capital, and others.
– nxyz, a San Francisco-based Web3 infrastructure platform for blockchains, raised $40 million in Series A funding. Paradigm led the round and was joined by investors including Coinbase Ventures, Greylock Partners, Sequoia Capital, and other angels.
– FOLX Health, a Boston-based digital health care service provider for the LGBTQIA+ community, raised $30 million in funding. 7wireVentures led the round and was joined by investors including Foresite Capital, Bessemer Venture Partners, Define Ventures, and Polaris Partners.
– Metalenz, a Boston-based metasurface optic company for consumer electronics, raised $30 million in Series B funding. Neotribe Ventures led the round and was joined by investors including Intel Capital, TDK Ventures, 3M Ventures, Foothill Ventures, and M Ventures.
– NeuroFlow, a Wayne, Pa.-based behavioral health integration technology company, raised $25 million in funding led by SEMCAP Health.
– Diagrid, a Seattle-based startup for developers to simplify and de-risk distributed systems, raised $20 million in Series A funding. Norwest Venture Partners led the round and was joined by investors including Amplify Partners and Quiet Capital.
– Kyra, a London, U.K.-based creator economy platform, raised $15 million in Series A funding. Bonnier Ventures led the round and was joined by investors including LionTree, Torch Capital, GMG Ventures, Firstminute Capital, and others.
– Mercantile, a New York-based credit card platform for small businesses, raised $15 million in Series A funding. Index Ventures led the round and was joined by investors including First Round Capital, General Catalyst, SV Angel, Operator Partners, Box Group, and others.
– Spren, the Asheville, N.C.-based developer of the heart rate variability app Elite HRV, raised $11.3 million in seed funding. Drive by DraftKings led the round and was joined by investors including Eli Manning, MLB executive and general manager Theo Epstein, Boston Seed Capital, Karlani Capital, Permit Ventures, and others.
– ARTA, a New York-based logistics software and fulfillment services provider for goods and collectibles, raised $11 million in Series A funding. AXA Venture Partners led the round and was joined by investors including Corazon Capital, Coelius Capital, Pari Passu Venture Partners, and Mu Ventures.
– Capsule Corp Labs, a Biarritz, France-based NFT creation and development platform, raised €7.3 million in seed funding co-led by Digital Finance Group, Omnes Capital, REVAM, and Ternoa.
– AgriWebb, a Sydney, Australia-based livestock business management solution, raised an additional $6.7 million in Series B funding. Germin8 Ventures and iSelect Fund invested in the round.
– 5C Network, a Bengaluru, India-based online medical diagnostics platform, raised $4.6 million in Series A funding. Celesta Capital led the round and was joined by investors including Unitus Ventures, Axilor Ventures, and other angels.
– Silveray, a Manchester, U.K.-based X-ray technology company, raised £2.2 million ($2.44 million) in seed funding. The UK Innovation & Science Seed Fund led the round and was joined by investors including ACF Investors, R42 Group, UK Future Tech Investment, InnovateUK, Cambridge Angels, and SyndicateRoom’s Access fund.
– Sunny, a Tulsa-based period care startup, raised $1.3 million in pre-seed funding led by Atento Capital.
– Vista Equity Partners agreed to acquire KnowBe4, a Clearwater, Fla.-based security awareness training and simulated phishing platform provider. A deal is valued at approximately $4.6 billion.
– Aplazo, backed by Oak HC/FT, acquired Sensai Metrics, a Mexico City, Mexico-based data analysis software platform for brands. Financial terms were not disclosed.
– Heritage Distribution Holdings, backed by Gryphon Investors, acquired Coastal Supply Company, a Knoxville, Tenn.-based HVAC/R distributor.
– Victory Live, backed by Clearlake Capital and Sam Soni, acquired Ticket Evolution, a New York-based software platform for the ticketing industry. Financial terms were not disclosed.
– Diamondback Energy acquired FireBird, a Fort Worth, Texas-based oil and gas company, from RedBird and Ontario Teachers’ Pension Plan, for approximately $1.6 billion.
– Bitrise acquired Flare.Build, a San Francisco-based backend services provider for the Bazel build system. Financial terms were not disclosed.