Bonfire Ventures secures $230M for two new funds targeting B2B software startups


Bonfire Ventures venture capital B2B software
Image Credits: Bonfire Ventures /

Bonfire Ventures, a Los Angeles venture capital firm, invests in seed-stage business-to-business software companies and aims to change the odds so that more than the average 33% of companies in this sector make it to Series A.

The firm seems to have some good traction so far. It says over 85% of its portfolio companies raise follow-on funding — a collective $1.15 billion — and its first fund is “ranked as one of the top 5% of VC funds globally,” while the second fund is in “the top 10% of their respective vintage years.”

Some of the companies getting follow-on funding include digital adoption company Spekit, led by CEO Melanie Fellay, which announced a $45 million Series B in January, consumer goods app company Aforza and e-commerce company Swell.

Both managing directors Jim Andelman and Mark Mullen were leading their own venture capital firms in the early 2000s and often co-invested on startups and decided to combine forces as Bonfire Ventures. The third managing director, Brett Queener, joined in 2018 after a career at  Salesforce and Siebel Systems.

They secured $230 million in capital commitments for their two new funds, which include a third core seed fund of $168 million and a second opportunity fund flush with $63 million. The firm’s leaders tell me they are “intentionally selective” in the number of startups they invest in under each fund, around 25 to 30, so they can give more specialized support to founders.

Andelman and Queener spoke to me about the new funds, how the firm is working with startups and what they are telling their portfolio companies during this challenging investment environment. The following conversation was lightly edited for length and clarity.

TechCrunch: How did you and Mark Mullen start working together?

Andelman: The L.A. venture community was small for a long time, still relatively pretty small, and we all had small funds. We bumped into each other all the time and collaborated a lot more because we had independently developed the same investment focus in the same geography, same sector, same stage. We joined forces for a couple of reasons: One, we knew there was a great opportunity here for a bigger firm to play a bigger role in the ecosystem. We knew with a bigger team we could better support founders and the community. Two, we wanted to build something that outlasted us. It started as the two of us and now there are seven of us.

What’s your approach in investing in companies?

Queener: We’re going to spend the next 10 years of our lives together with the people that we invest in, so we have to like them and they have to like us because the journey for any software company is long and has lots of ups and downs. Our approach is pretty hands-on, like a two-way partnership. We are looking for software companies with a strong narrative that we think can become iconic brands with products that buyers cannot live without. We also want a strong emotional connection to the company.

Tell me about the traction from your previous funds.

Queener: Both fund one and fund two are the top 5% or 10% in their vintage years, essentially when it started and how it performed. You can ask “How is that the case? Are we amazing pickers?” We’re not bad, but the companies also have to do well. In most seed-stage investment funds, they expect a 75% death rate. Less than 33% raise an A and only 50% raise any follow-on capital. Where that number for us is 85%.I think these results will probably be even better, compared to other venture capital firms, over the next five years.

Swell takes in $20M to develop more adaptable headless commerce infrastructure

Why should companies add you to their cap tables?

Andelman: We are very much a low-volume, high-conviction, high-support investor. We maintain the bandwidth to be responsive to founders and earn the role of first call when they have a question. That’s something you earn by being responsive, by being trusted and smart. That’s why we focus just on B2B software. The whole team’s entire careers have all been in and around the software. We have the time to dig in with the founders when they need us most.

What do you make of the VC slowdown we are seeing?

Andelman: The public cloud and software index, is down more than 50%. Meanwhile, the companies continue to grow. We have now come back down to a sort of historical norm or even a little lower. Things that were in the top quartile and trading at 20 times more revenue are now trading at seven-and-a-half times for revenue. So this is going to be a very challenging period for a lot of companies and a lot of VCs. I’m very grateful that my career has steered me, and then we steer the firm to focus on B2B software. Software companies have never been small, so I’m grateful that we are where we are in this climate. Businesses that are less capital efficient, that have less control over their expenses can’t really revert to a skinny model and are going to be the ones that take a much bigger challenge.

Queener: The VC slowdown, to some extent, is the end of free money. Normally, we have a correction in tech every seven years. With the federal stimulus, the COVID response package and interest rates being low, valuations got way out of whack and what we’re seeing is a realization that was untenable, and that profitability, efficiency and making money actually matters.

It’s pivot season for early-stage startups

Will all of this change your future approach to investing?

Queener: Our approach is the same in that when we invest in companies, we don’t place too many bets. I think what will change is more around making sure you don’t invest too far ahead of what companies see in front of them.

Andelman: There are going to be some investments on the margin that made sense in November when capital was abundant and valuations were 100 times ARR that don’t make sense today. Every business is going to adjust its plan to some degree one way or the other. We’re fortunate that a lot of the really significant needle-movers across the funds are well capitalized.

How are you advising your portfolio companies now?

Andelman: We are giving similar advice to what I think a lot of VCs are, which is if you can defer your next fundraise by 12 or 24 months you should. The next 12 to 24 months are going to be very unpredictable, and there are always trade-offs between how much you invest in growth and how much you burn. There’s no one size fits all. We are going company by company engaging with each founding team to make sure that we are comfortable, collectively, with the investments that the businesses are making and giving those founders the best perspective and guidance.

Just how much has late-stage venture capital slowed?

More TechCrunch

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

3 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?