B Capital raises $2.1B growth fund as late-stage prices slowly fall

Investor appetite for backing late-stage companies may have decreased substantially since the Federal Reserve began to raise interest rates in 2022. But that has not stopped the multistage-focused B Capital Group from raising its largest growth fund to date.

The firm announced Thursday that it closed its third venture growth fund on $2.1 billion, a more than 2.5x step-up from its $820 million second vehicle raised in June 2020.

 “We are excited to invest in great companies, but also at great prices, something that in the last few years was tough,” said Howard Morgan, B Capital’s chair and general partner. “[In the past] we found great companies, but the prices weren’t always exactly what we liked.”

US-based late-stage companies have raised $13.5 billion in Q4 2022, the lowest quarterly deal value since Q2 2018, according to data from the latest PitchBook-NVCA Venture Monitor.
Venture capitalists have slowed their investment pace in large part because investors were unwilling to pay the prices entrepreneurs were expecting.

Morgan said that while he is starting to see the pricing gap slowly close, he expects more strong companies will accept lower valuations or structured terms in the second half of this year as they begin to run out of cash runway.

“We have the dry powder now to take advantage of that,” he said.
 
B Capital plans to back 35 to 40 Series B through Series D companies, primarily in the digital health and software sectors, over the next two and a half to three years, according to Morgan.
 
The firm, which operates out of nine locations in the US and Asia, was founded in 2015 by Meta co-founder Eduardo Saverin and a former Bain Capital veteran Raj Ganguly. B Capital later hired two more leaders: Morgan, an early executive of Renaissance Technologies and co-founder of First Round Capital, and Sheila Patel, who was previously chairman of Goldman Sachs Asset Management.
 
In addition to this late-stage vehicle, B Capital is currently investing from its first early-stage fund, which closed on $250 million in July.