Venture capital firm Bull City Venture Partners has long been viewed as a dynamic duo led by its two founders, seasoned investment partners Jason Caplain and David Jones. But with the promotion of Michael Lee, who joined the firm in 2021 and was named to a principal role this month, it’s now a trio.
Triangle Inno spoke with Caplain and Lee about what expanding the leadership team means for the firm that's based in Durham, and what’s happening with the recently-closed Fund Four.
Life as a trio
Lee, who went from TrueBridge Capital Partners in Chapel Hill to FJ Labs in New York where he sourced and led deals such as Produce Pay and Verb Energy, is a UNC-Chapel Hill alum. Like Caplain and Jones, he plans to be front and center in the Triangle’s entrepreneurial ecosystem.
Caplain describes Lee’s promotion from senior associate as a way to better position the firm as it manages a larger fund – “having more firepower on the team, being able to add more value to companies.”
Bull City Venture Partners closed on an oversubscribed fourth fund last year, securing $53 million in capital commitments.
Lee’s inclusion has also helped expand the firm's scope, which used to focus almost solely on companies in the mid-Atlantic area and the Southeast. Lee’s history with New York firms such as FJ Labs helped extend Bull City's network into the Empire State, Caplain said.
Right now the firm targets deals from New York to Atlanta, “but we’ll bounce out of that if we see something else,” Caplain said.
The new fund is seven companies in, having invested in firms such as Tiny Earth Toys in Durham and Levitate in Raleigh. But it’s clear the firm has slowed its investment pace. Last year, it closed on just one new deal. And it has yet to publicly announce a new deal in 2023. For most of its history, Bull City Venture Partners has invested in two to four new deals a year.
Lee said that while a more thoughtful approach to deploying capital has always been part of the firm's DNA, the present market conditions factors into deal pace.
While the firm may not be prolific with its checks, deal flow is running at peak levels, Caplain said. The team is meeting with entrepreneurs consistently – something it’s done since its inception.
The typical strategy calls for Caplain and team to get to know a startup over time before writing a check. But in the past couple of years the firm has been even more measured, they said.
Lee said that In 2020 and 2021, due diligence was faster, checks were bigger and pricing was looser. But as the market tightens, the firm's strategy of conservative due diligence starts to get replicated by other players.
“We have maintained kind of a steadiness that I think others are now trying to emulate,” he said.
The dynamics haven’t changed for Bull City, which considers itself a founder-driven investor.
“We’re constantly challenging entrepreneurs to come back to us with further proof and further traction,” Lee said. “We’re tracking them vigorously. … That’s why our pipeline tends to be rather large and companies stay in the pipeline, I think, longer.”
Lee said the mission, and the team, matters.
“We don’t find the answer for where we invest our money deep on the hundredth tap of a spreadsheet,” he said. “For us it’s about the human connection.”
Lee and Caplain say getting on their radar isn’t what results in termsheets. It’s staying on their radar – and that means staying in touch as milestones are hit.
“The sheer importance of that, the ability to communicate consistently over time to build a rapport, to convey progress is, I think, understated,” Lee said. “I think it’s perhaps the most important thing a founder can do when fundraising.”
