Triangle Tweener Talks

00:00:04 - Announcer
Welcome to Tweener Madness, the high stakes startup showdown where eight promising companies go head to head for a $25,000 investment prize from the Triangle Tweener Fund. But before the competition kicks off, let's meet the people making the tough calls. The judges. In this special Meet the Judges episode, we're sitting down with the investors and industry leaders who will be asking the hard hitting questions, evaluating the startups, and ultimately deciding who moves forward in this bracket sty competition. Each round, three judges will vote on which startups advance leading up to the finals in early April, where one company will take home the top prize from the judges. You'll hear about their backgrounds, what they look for in a winning startup, and maybe even get a little inside scoop on their decision making process. So if you're a founder looking for investment, an entrepreneur curious about what investors really want, or just someone who loves a good business battle, you are in the right place. Let's meet the judges. Here's your host, Scott Wingo.

00:01:06 - Scot Wingo
Hey everybody, it is Scott Wingo. We are continuing our Tweener Madness selection committee shows. With us today is Jason Kaplan. He is general partner and founder of Bull City Ventures. Welcome, Jason.

00:01:23 - Jason Caplain
Hey, thanks, Scott. Thanks for having me.

00:01:25 - Scot Wingo
Absolutely.

00:01:26 - Scot Wingo
So we had DJ on and he gave a little bit of background, but definitely want to hear it again from you. Let's start on the personal level. You, I saw you just had your Patriots cup. You're not from around these parts originally. How did you, where are you from and how did you get to North Carolina?

00:01:43 - Jason Caplain
Yeah, yeah. So I think everyone who has been here for like at least a year is like now from here giving like such a melting pot. But I grew up in Massachusetts about an hour south of Boston and Fall River, Massachusetts and, and then went to school up there and then ended up in North Carolina after my first job. Initially worked for an investment banking firm out of school and then really, really wanted venture capital along the way. Even when I was back in college and a lot of the VCs I talked to along the way had said, hey, look, you're going to really, really have to work for a tech company. That's a good path. And so start looking along the east coast for different opportunities and saw an opportunity at Red Hat and that's how I ended up here. In December 98, I moved here.

00:02:40 - Scot Wingo
Cool.

00:02:40 - Scot Wingo
How did you know in college you wanted to do venture? Like what, it was relatively early and I guess there was a fair amount in the Northeast. But like, what, what appealed to you about that?

00:02:50 - Jason Caplain
Yeah, so I come From a very entrepreneurial family on both sides. So both grandfathers started companies. Not in tech, but I saw the entrepreneurship stuff happen. And then in college, I interned for the investment banking firm called Harrison, Hurley and Company. And one of the things we did is help raise capital for companies. And I kind of looked at venture as a way to shortcut that process a little bit rather than go out and do a long process with an investment banking firm being able to find companies that we liked and invest and help propel them. So I kind of like the idea of a venture back to when I was at Bentley. Actually applied to like 50 firms in Boston for my firm. And I heard back from one that was Summit Partners, they said no. But didn't he recommend a 49? Yeah, I tried even back in college to get in.

00:03:49 - Scot Wingo
Yep.

00:03:51 - Jason Caplain
The.

00:03:52 - Scot Wingo
And then in college, you studied accounting or like, finance or.

00:03:56 - Jason Caplain
Yeah, finance. Yeah, I graduated with a finance degree.

00:04:00 - Scot Wingo
Yeah.

00:04:01 - Scot Wingo
Cool.

00:04:02 - Scot Wingo
And then how did you work your way to North Carolina?

00:04:06 - Jason Caplain
Yep. So ended up here in North Carolina back in December 98 with. With red Hat. And I found the opportunity. I asked my college roommate what he thought. He was at Microsoft at the time, and he's like, dude, you really need to go here. And came down and interviewed with Manoj, who you know well, and the rest is history. Ended up there. I think I was employee number 80.

00:04:40 - Scot Wingo
Wow. Okay.

00:04:41 - Scot Wingo
So that was still. Bob Young was CEO and then actually.

00:04:44 - Jason Caplain
Matthew become CEO I think the previous month. So we were on TW Alexander when I. When I joined.

00:04:53 - Scot Wingo
Neat.

00:04:53 - Jason Caplain
Yeah.

00:04:54 - Scot Wingo
And that's definitely before the IPO. How. How much before the IPO was that?

00:04:58 - Jason Caplain
Yeah, so we went pop. So I joined in December 98. We went public in August 99. So really, really fast.

00:05:06 - Scot Wingo
Yeah, that was a crazy first nine months of employment. Economics.

00:05:11 - Jason Caplain
Yeah, it went from, uh, you know, we were funded by Benchmark and Greylock. Uh, and. And, you know, there was. There was a lot of, well, rumors about going public. But all of a sudden when I got tied into that whole process and had to get, you know, current on everything, it. I was, you know, it was very, very exciting times. I think it was the ninth most successful IPO too, from like a return standpoint. The first day.

00:05:41 - Scot Wingo
Yeah. Yeah.

00:05:42 - Scot Wingo
Did you get to work on the S1 and all that kind of stuff or what was your role?

00:05:45 - Jason Caplain
Yeah, worked on the ipo. Anything that was like, finance. We had such a small team, you know, but OSH ran it really lean. So anything that was like, finance or operations related, I got tied into, like, the acquisitions. The ipo. We had Red Hat Ventures for. For a little bit, where we invested in some companies, including companies like Rackspace. So get involved with some of that as well.

00:06:10 - Scot Wingo
Yeah.

00:06:11 - Scot Wingo
One of the cool, innovative things you guys did from a pricing perspective is with, I guess you guys call it rhel, which was the Red Hat Enterprise Linux. You guys did a subscription plan on that. So it's kind of very early. It wasn't SaaS per se, but definitely subscription pricing, which was pretty unheard of at the time.

00:06:29 - Jason Caplain
Yeah, I remember working on that with Manoj at the day that. Those days we had, like, box sets that would sell like a Best Buy and Office Max and Office Depot and all these retailers. Some are gone, but yeah, we were working on that subscription model was really, really early, so it was a lot of fun to work on.

00:06:48 - Scot Wingo
Yeah.

00:06:48 - Scot Wingo
And I think Wall street kind of figured that out over time. That recurring revenue is pretty. Pretty magical.

00:06:54 - Jason Caplain
Yeah.

00:06:55 - Scot Wingo
Help smooth out the ups and downs.

00:06:57 - Jason Caplain
Definitely.

00:06:57 - Scot Wingo
Now, they obviously love it with the prevalence of B2B software as a service.

00:07:01 - Jason Caplain
Yeah, those are early days for that model. So that was a lot of fun.

00:07:04 - Scot Wingo
Yeah.

00:07:05 - Jason Caplain
Cool.

00:07:05 - Scot Wingo
And then how'd you decide to leave Red Hat and do whatever came next?

00:07:09 - Jason Caplain
That was always the plan. Actually. My initial plan was to move here for, like, two years, do the Red Hat thing and then leave. So I. I stayed for two years. I was probably burned out after about a year and a half and started kind of looking after a year and a half and then left in December 2000 to start our first fund. And. And. And the. And guys like the exec team at Red Hat kind of knew I was really transparent about what I wanted to do. So they were all really supportive. I think, like, half the management team invested in the first fund. So very supportive with. And I was, by the way, when I left, I was 25 years old. So when I started this, you know, 25. They were incredibly supportive.

00:08:00 - Scot Wingo
Yeah. Cool.

00:08:02 - Scot Wingo
So year 2000 was kind of a crazy year. So you're raising your fund, and that was called Southern Capital Ventures.

00:08:10 - Jason Caplain
Yes.

00:08:11 - Scot Wingo
Fund One south, also known as South Cap. So it was you, David and Ben Brooks, or was that predated David?

00:08:19 - Jason Caplain
Yeah, so it was. It was. So David joined about halfway through Fund One, and Ben was splitting time between Southern Capital and being a wealth manager. We had Dave Murray, who was running his own PR firm, and he passed away, but he was providing marketing support to us. So, yeah, that was the team.

00:08:48 - Scot Wingo
Got it. Yeah, I forgot David.

00:08:50 - Jason Caplain
And then David joined.

00:08:51 - Scot Wingo
David, of course.

00:08:52 - Jason Caplain
Yeah, that David joined about halfway through as I mentioned.

00:08:56 - Scot Wingo
Yeah, halfway through like five years into a ten year fund or like halfway through the.

00:09:02 - Jason Caplain
I think he probably joined like I have to look at probably like three years in, maybe two. Three years in.

00:09:06 - Scot Wingo
Yeah.

00:09:08 - Scot Wingo
Cool.

00:09:09 - Scot Wingo
So you did your first fund. How big was South Kaplan?

00:09:13 - Jason Caplain
Incredibly hard. Hard to raise. Scott. The goal was to raise $20 million initially and the fund size ended up. What a humbling process. The fund size was under 5:1. It's. We were raising the fund during a down market and people didn't want to put money in the public market, never mind putting money in a fund that's run by a 25 year old kid who's never run a venture fund before. So it was really, really hard to raise that first fund, which I think actually helped by the way.

00:09:47 - Scot Wingo
Yeah.

00:09:49 - Scot Wingo
So at least you had some, you could take some shots on goals. So you started investing and then how did you get into South Cap 2?

00:09:57 - Jason Caplain
You know, it was, it was really getting some early exits was, you know, was important. So you know we, given the time frame, given how hard it was to raise the capital, we were very disciplined on how to put that money to work. I think there was like an increased respect for the dollar and we focused all, you know, Fund one was all on North Carolina companies, made eight investments including channel advisory, yours. Right. So glad we invested there. And it. We were lucky enough to focus on experienced entrepreneurs, some really good companies, some attractive valuations given the downturn and scroll that all together and we ended up with a really good fund that had some early exits and propelled us to fund two. Fund one made eight investments and three went public. So really good hit rate.

00:11:00 - Scot Wingo
That's pretty good.

00:11:01 - Scot Wingo
Yeah.

00:11:02 - Jason Caplain
We call that the power long.

00:11:04 - Scot Wingo
Yeah.

00:11:06 - Scot Wingo
The South Cap 2, how big was that? So you went from kind of like a five.

00:11:11 - Jason Caplain
So with David on board, the goal is to raise fund two with the goal is to raise 12. We raised and we raised 15 and relatively with some with some speed as well this time around. So it didn't take two years. I think that one was like nine months.

00:11:27 - Scot Wingo
Yeah.

00:11:28 - Scot Wingo
Nice. Cool.

00:11:30 - Scot Wingo
So that was probably 2005.

00:11:34 - Scot Wingo
Ish.

00:11:35 - Jason Caplain
I think it was 2005, 2006. Yeah. Somewhere around there.

00:11:39 - Scot Wingo
Yeah. Okay.

00:11:41 - Scot Wingo
All right, cool.

00:11:41 - Jason Caplain
They all blend together now after 25 years they all kind of blend.

00:11:45 - Scot Wingo
Yeah.

00:11:45 - Scot Wingo
I have to go look at my dates. I have it memorized because I do this bio talk so many times the. And then so that time. So this. So now you've got a bigger fund, you can take more, do more investments. So you probably did Last first fund you did eight. This one you probably did more like 10 to 12.

00:12:02 - Jason Caplain
Yeah, I think we ended up with like 14. And I think that's because of also the division with Reverb. So Reverb ended up becoming three companies. But that fund, the big difference between fund one and fund two was also, and David's been really good about this, is pushing us to invest outside the region. And so fund two was really spent. Let's spend a lot of time up in the D.C. area. So D.C. northern Virginia, Maryland. And let's start building relationships and investing up there. So that was fun too as well. So we invested like an Avicode double positive Wedding wire out of that fund, which is all up in that market.

00:12:50 - Scot Wingo
Gotcha.

00:12:52 - Scot Wingo
And then so then after that you started Bull City. So funds one, two and three. You're currently investing out of fund three.

00:13:00 - Scot Wingo
Right.

00:13:01 - Jason Caplain
Investing out of fund four. So four.

00:13:05 - Scot Wingo
Sorry.

00:13:05 - Scot Wingo
Yep, yep.

00:13:06 - Jason Caplain
So, so, so we called it, we kept the, the numbers the same given David and I have been the sole full time guys. So fund three was, was a 20. The goal was to raise 25 or raise 26. And then fund four, the goal was to raise 50. We raised 53. So kept them all around our targets. Got it, got it.

00:13:31 - Scot Wingo
Cool.

00:13:32 - Scot Wingo
So you're currently investing out of a $53 million fund. You've got, let's see, 53 plus 26. So kind of like 80 million assets under management. Something. Something in that zone. Yeah.

00:13:44 - Jason Caplain
Plus, plus some of the SPVs that we've raised. It's, it's a little over. You know, it's like 110 including the SPVs.

00:13:52 - Scot Wingo
Nice. Cool.

00:13:54 - Scot Wingo
So tell folks that don't know about Bull City. Kind of the, the reverse pitch of, you know, where you guys invest, where you don't invest. That, that whole kind of the sweet spot from stage and check size and all that good stuff.

00:14:08 - Jason Caplain
So out of the $53 million fund, we run a very concentrated portfolio that makes us pretty unique. So we're doing mostly seed and early stage B2B software companies typically along the, you know, hugging the east coast. And, and then every once in a while you'll see us do something maybe a little bit later. Stage. So call it 90% of the time we're doing seed and early stage. 10% of the time we might go a little bit higher and get it, get into a company that maybe that's been bootstrapped but. Or somehow we missed and make up for getting in later. So a company like Wedding Wire would be a good Example of that. Or Etix. Locally, Avicode, double positive. All companies are doing north of 5 million in revenue when we get in. And we are pretty slow investors. So we do two to four new investments per year. And we think we're very, very helpful on the way with introductions to customers, partners, potential acquirers, and lately very active, especially with hiring. So that's kind of the quick, quick overview.

00:15:22 - Scot Wingo
So let's say what you won't invest in. So you probably wouldn't invest in a company that was in Seattle or something. So it needs to be kind of in the southeast region.

00:15:31 - Jason Caplain
Yeah, yeah. Things that we won't invest in. So we will invest anywhere. There's no, we're not, you know, economic development for like the Southeast. I always tell people that may be a crude way to say it, but we'll invest anywhere. Usually when we're investing like we've done a handful of companies out in the Bay Area. Learn to win. Last summer we invested in a company in Redwood City, California. But it's two guys that David's known back to when they were in college. So he's known those guys for 10 years back to when they were both at UNC. So we'll follow people out to the Bay Area. We've done that a bunch with Connect. We did it with launch notes art.com. so we'll follow companies as they, as they. If we have a relationship here and they move somewhere else, we're just not running around Seattle or other places looking for new deals.

00:16:21 - Scot Wingo
You don't do biotech, like life sciencey stuff, right?

00:16:24 - Jason Caplain
No biotech. We're not that smart, Scott. Unfortunately. Yeah, no biotech. No biotech. We have done like, you know, software inside healthcare. Uh, that's been really big for us. But, but we don't do, you know, pure life science companies.

00:16:41 - Scot Wingo
Yeah.

00:16:42 - Scot Wingo
Cool.

00:16:43 - Scot Wingo
And then check size. If you were to be forced to answer a check size, like what's the range and what's kind of like your average initial check size?

00:16:52 - Jason Caplain
Yeah, initial check size is like around 750. But out of this fund, we did, you know, invested in three founders with and we put in 200k initially. So out of this fund. So we have no problem kind of going down really low, even pre revenue if we, you know, if we like the company enough and we'll write that early check. The, the issue there is like, there's going to be a path. There's going to be a path to put more capital in because our, our goal is like, hopefully over time we can put two $3 million in the company. So we hope that they raise more, but that's. That's kind of. We'll go. We'll go super early if we like something a lot.

00:17:35 - Scot Wingo
Yeah, got it.

00:17:37 - Scot Wingo
Help. This is an interesting topic that I find a lot of founders don't know about, and it's. It's reserves.

00:17:42 - Announcer
Right.

00:17:43 - Scot Wingo
So how do reserves work? Like, how would you explain that to an entrepreneur that didn't understand that concept?

00:17:50 - Jason Caplain
Yeah. So.

00:17:51 - Scot Wingo
So let's pick like, this. This company, you've invested 750 and like, not to, you know, you know, so you want to put more in.

00:17:58 - Jason Caplain
Yeah.

00:17:58 - Scot Wingo
And you have your pool of money.

00:18:00 - Jason Caplain
Yeah. I mean, we. We have a model in inside. We have a model inside Bull City that David and I keep up with, which allocates. So we have an initial check to a company. Our firm belief is, like, usually these companies that we're getting into all burning cash. We want to have reserves to be able to put more money in the company at a later date and be able to add to our position, especially as a company raises more capital to protect our ownership. So we, you know, our thinking usually is, like, out of this $53 million fund, we want to have two to $3 million per company. So when we write that check for 750, we've got a bunch of the sidelines to put more capital in later at a later date, and we share that with the founder, usually what the number is and what we have in reserves as we go forward.

00:18:50 - Scot Wingo
Yeah.

00:18:51 - Scot Wingo
Cool.

00:18:52 - Scot Wingo
As a founder, I've always made it my goal to unlock the reserves.

00:18:56 - Jason Caplain
Yes, absolutely right.

00:18:57 - Scot Wingo
If you tell me there's a pot of money over there somewhere, I'm going.

00:18:59 - Jason Caplain
To go, there's a pot of capital. How do I get to that the fastest?

00:19:03 - Scot Wingo
Yes.

00:19:05 - Scot Wingo
Cool.

00:19:05 - Scot Wingo
What are any personal categories you're particularly interested in, or.

00:19:11 - Jason Caplain
No, I, I, you know, I. No, there's nothing personally that I love the companies that make a difference, obviously. I think we all do. The companies like green places in our portfolio that help keep track of your carbon footprint and look for ways to reduce it. But at the end of the day, I love working with all of our companies, all of our founders. I'm glad they selected Bull City, and it's a fun journey that we're on with them.

00:19:41 - Scot Wingo
Yeah, Cool.

00:19:44 - Scot Wingo
That's the fun part of the triangle, is the crazy diversity of companies that we have here. It's really interesting.

00:19:50 - Jason Caplain
And it's increasing, which is great. I think that's only going to increase as we go forward.

00:19:55 - Scot Wingo
Yeah.

00:19:56 - Scot Wingo
What are some of your most successful investments?

00:20:00 - Jason Caplain
So the most successful are yours. So the IPO with Channel Advisor, which is great, and Wedding Wire was really good. So that grew that company.

00:20:13 - Scot Wingo
That's an IPO as well.

00:20:14 - Scot Wingo
Right.

00:20:15 - Jason Caplain
We did not go public. We sold when Premier came in and then they combined it with. They bought the Not. So now it's the Not Worldwide.

00:20:26 - Scot Wingo
Yeah, yeah.

00:20:28 - Jason Caplain
So that was really, really good as well. And then Reverb Nation, which looked like a sleeper for a while. So Reverb Nation, Mike Dornbrigg's company, ended up birthing two other companies, so it birthed Adworx, which is still going, and also playmetrics. So the mic sold. Playmetrics sold Reverb. So we had a really good return with that as well.

00:20:58 - Scot Wingo
Yeah.

00:20:59 - Scot Wingo
Cool.

00:21:00 - Scot Wingo
Any anything in your anti portfolio stuff you said no to that that you regret?

00:21:06 - Jason Caplain
There's a lot. There's, you know, for every, you know, that's the interesting thing in this business. Like for every great company you have, like, there's like five others you missed that you're like, you had a shot at and you passed for a variety of reasons. Yeah, I mean, we've got peloton, right? So new John Foley, David and I sat across the table from him at breakfast in New York and he pitched us this idea. He had just finished running the nook at Barnes Noble, and so it's like a nook and a. We. We came out of the breakfast meeting, we're like, this is a nook on a bike. And we're like, there's no. We're laughing as we're like, leaving. Like, that's crazy. Flatiron Health in New York, Nat and Zach, they actually passed on us initially. David did a great job creating a list of, like, prospects for them. They flew down here and after David ran them around in his car for two days, they gave us a spot to get in their deal. And then we said no. And then, you know, there's a zillion local stories, you know, that we've had, you know, from AI match to, you know, we wish we obviously were in Pendo. Having known Todd and, and Eric for a long time. There's. There's a lot of. There's a lot of great companies out there that we, we missed. So I think that's what keeps, keeps the, the VCs, hopefully, you know, a little bit more humble.

00:22:37 - Scot Wingo
Yeah.

00:22:38 - Scot Wingo
Cool.

00:22:38 - Scot Wingo
I don't know. You've been at this since you were 25 and you're no spring chicken anymore. I don't know how many pitches you've seen in 25 years of doing this, but it's probably into the thousands. Any. What are your tips for folks either do's or don'ts or a little bit of both that are, you know, this is probably a lot of first time founders in our contest. They're, they're super early. Any. Anything you can kind of tell them on, on how to nail a pitch from that stage?

00:23:08 - Jason Caplain
You know, a couple things I'll mention Scott. One, I think, you know, it's important to keep it clear, fit into the time frame. I know a lot of founders that like in competitions like this that they're given five, ten minutes and then they, you know, they find out they're on like halfway done with the slides and the, the time slots over. I, I think it's important to understand like hey, you know, what does the business do? And, and why, why you. Why you're, why you're the best at getting, getting this done. And not just the best locally, but you know, the best on a global playing field eventually. The other thing I'll mention too, which is really interesting and I've never had this, I didn't know or I haven't gone to a meeting like this and had this knowingly happen to me. So I met with a founder the other day and she was like, hey, can I share something with you? A little creepy. And I was like, okay. And she opened up chat GPT and she had a thing there and she's like, hey, this is what my business does. I'm meeting with Jason Kaplan from Pool City Venture Partners. What questions will he ask me? And it, it was crazy because 50% of the questions there were questions I already asked and the other 50% questions I was thinking about. So I mean use. I think there's so many great tools out there that founders should use to prep for something like this. I think that this is one example. But you know, use the use of tools out there. There's lots of conversation, conversational tools as well. Like, like Claude is really good too. So I think like use some of these tools out there to help prep for, for stuff like this.

00:24:54 - Scot Wingo
Awesome.

00:24:54 - Scot Wingo
Well, thanks Jason for taking time to introduce yourself to all the folks that are going to be participating in Tweener Menace. We look forward to seeing you in the studio. I forget which session you're in, but we'll have you live, Jason, Live without a Net as one of our selection committees for the contest. It's going to be a lot of fun.

00:25:11 - Jason Caplain
Awesome, thanks. Scott, as always.

00:25:13 - Scot Wingo
Yeah, yeah.

00:25:14 - Scot Wingo
Appreciate you doing this and all you guys do to support the local ecosystem. Thank you.

00:25:18 - Jason Caplain
Thanks, Scott.

00:25:23 - Announcer
That's a wrap on this Meet the Judges episode. Now you know the minds behind the decisions, the investors and industry leaders who will be putting these startups to the test as Tweener Madness kicks off. They'll be asking the tough questions, making the tough calls, and deciding who advances in the bracket, all leading up to the finals in early April. Make sure you're subscribed so you don't miss a single matchup. And if you want to follow along with all things Tweener Madness and the triangle startup scene, head on over to tweenertimes.com also, if you're thinking about launching your own podcast or want to bring professional production to your brand, check out earfluence.com the competition is about to begin and we'll see you soon in the next episode.