US-based venture capital fund Bolt has enlisted corporate backers to help it raise a $25m second fund in order to expand its investment range, managing director Ben Einstein told Global Corporate Venturing.
Formed in 2013, Bolt raised $3.8m for its first fund from angel investors and backers including computer equipment supplier Logitech, software company Autodesk and investment firm Grishin Robotics.
Less than 18 months after that first fund closed, Bolt has raised $25m more for a second, in which networking technology provider Cisco joined Bolt’s existing investors as a limited partner. Einstein said that although the fund was formally closed earlier this month, the capital was actually raised around two months before.
Bolt’s investment strategy has also expanded. Whereas it initially invested $50,000 in each startup in exchange for a stake sized between 5% and 15%, it will now seek to inject up to $500,000 in each seed-stage company it funds.
“We were a very early investor [from the first fund],” Einstein said. “For about half of the companies we were the first party in, and the other half had raised less than $1m. We usually participate as part of a seed financing, but on slightly different terms.
[Expanding the size of Botl’s investments] is more to maintain ownership in follow-on rounds for companies in which we invested at pre-seed stage, and to occasionally make investments in companies we believe in and love, and in larger seed rounds or series A’s.”
Unlike many other seed-stage funds, Bolt has a very distinct focus. It targets startups that operate at what it describes as the intersection of hardware and software, encompassing a lot of connected device and internet of things companies.
“The only fairly strict rule is really that any company we invest in has to be a hardware company, or have some physical thing they build,” Einstein explained. “The business is actually almost always a software business, and so many of the companies are not looking to sell a $100 product at a 20% gross margin at Best Buy. That is not their goal; it is usually something more ambitious than that.
“There is no specific vertical we go after or focus area we have. We look more for patterns in the kinds of companies that we are looking at investing in, maybe fairly distinct from other things that are happening.”
In addition to providing capital, Bolt also offers startups access to its workshopping and prototyping facilities. The first facility was established in Boston two years ago, but the capital raised for the latest fund will support a second facility at the Autodesk Workshop in San Francisco, where portfolio companies will be able to make use of Autodesk’s prototyping shop, as well as a dual fabrication space, and high-end wood and metal cutters.
“Our style of investing is very atypical,” Einstein said. “We are super hands-on and so we have engineering and design staff and these beautiful facilities, one in San Francisco and one in Boston, with many millions of dollars of equipment the companies can all use, and that is part of the investment we make. You would rather take our money versus some other generic seed fund because of all the other stuff that comes as part of the investment.”
As for the corporate LPs, Einstein did not disclose details on their specific investments but stated that they collectively contributed a little less than 50% of the $25m. The corporates do not provide strategic input for Bolt, but do get access to portfolio companies and will likely see a return on their capital investment.
“We have to be a fund first and a partner to these big companies second, and it is our job to be successful at this fund,” Einstein said. “I think the investors definitely want to get a return on their capital. There is also a marketing component of being attached to that sort of an early stage, well-branded investment vehicle that is in the target area for them. And a lot of it is about seeing what is on the ground.
“I think the most value from them tends to be [gained through] soft introductions, knowing the company really well and knowing what they like, and sending them companies that may not be typical, but [that would] be strategic for them.”
– Photo courtesy of Bolt.