Investment

This family-backed venture group opened a branch in Silicon Valley in 1975 – no wonder its returns are stellar

Few businesses started by a long-established family office are as plugged into the white heat of tech-driven innovation as Bessemer Venture Partners.

Back in 1865 entrepreneur Henry Phipps, the son of a shoemaker, set the tone through an innovation which mass produced the manufacture of steel. He named his family office after its UK inventor Henry Bessemer. 

In 1974 it spawned Bessemer Venture Partners which sets out to back innovation by companies using data-fuelled technology to mass produce the generation of revenue. 

In 1974, the Phipps family turned Bessemer Trust, a wealth management business, into a multi-family office, now managing $106 billion. It claims an impressive client retention rate of 98% over ten years

BVP investments have performed well and figured in 120 IPOs. To drive home its message that tech applications are  the way forward, it sponsors an index for cutting-edge stocks like Adobe and PayPal which provide software to clients from the cloud.   

Over the five years to October, its cloud index generated a cumulative return of 549% compared to 128% from the Nasdaq 100. A Wisdom Tree ETF which uses it has returned 64.7% since inception in June 2019, against Nasdaq’s 43.3%.

Hyperscience, BVP’s newest large investment – and possibly its most significant – offers corporate management the chance to use AI to make decisions. BVP believes it will “define the next generation of automation at scale”. 

Hyperscience uses Robotic Process Automation to input data from online and handwritten sources with 99.5% accuracy. 

Wealth manager TD Ameritrade, for example, uses Hyperscience to speed up its back office. Procedures like claims processing and loan origination can be completely automated.

When a corporate data fix is complete, Hyperscience can use machine learning to turn corporate procedures into workflows and solutions. This means software ends up making decisions in tandem with management.

The impact of these decision-making hybrids on office management, already reeling from Covid-19, could be scary. But it could also save companies a lot of money, and time.

Hyperscience has raised a total of $140 million this year. Other backers, often accessed by family offices, include Tiger Global and Mary Meeker’s Bond Capital. 

Elliott Robinson of BVP, a Hyperscience director, says: “Data automation is step zero of any business process and this is Hyperscience’s competitive edge. Their technology is outpacing competitors by a landslide.”  

On October 26, BVP increased its wager on business workflow management by participating in a $27 million funding round for Salto, based in Tel Aviv, with Salesforce Ventures. 

Henry Phipps developed his interest in steel manufacture through an association with his friend Andrew Carnegie. He went on to build a second career in real estate before putting together his family office. 

Bessemer Securities now provides capital to a broadly-based private equity firm Lindsay Goldberg, now worth $13 billion as well as BVP, which manages nearly $5 billion. 

In 1974, the Phipps family turned Bessemer Trust, a wealth management business, into a multi-family office, now managing $106 billion. It claims an impressive client retention rate of 98% over ten years.

The business is chaired by asset manager Stuart Janney, great-grandson of Henry Phipps and chairman of the Jockey Club. 

Bessemer Venture Partners has been at the cutting edge of tech-driven opportunities since it opened a Silicon Valley office in 1975.

A rich array of BVP investments include Pinterest, Shopify, Yelp, LinkedIn, Skype, Zoom, Betterment, Mindbody, Rocket Lab and Twilio.

More than 120 of its companies have achieved an IPO. Consumer, enterprise and healthcare are among BVP’s favoured sectors.  

BVP launched a seed fund for health startups in June 2018. In October it raised a $1.85 billion mega fund. 

In August, BVP partner Charles Birnbaum said fintech was poised to follow other sectors in reaping rich rewards from their software. 

“The need for financial services companies to wake up and finally digitise all the way they’ve been talking about doing for a long time…is the real enduring tailwind for fintech.” 

Shopify has moved into e-commerce. Square has moved into lending. Goldman Sachs has bid for General Motors credit card business. Blend has raised $75 million to digitise mortgage services.

Mastery of data through the cloud is creating opportunities at a faster and faster speed, allowing several providers to diversify into new areas via vertical integration.

As well as Hyperscience, BVP has just invested in Manta, which seeks to track the lineage of data as it flows through organisations. Smaller investments during October comprised medical businesses, cybersecurity and legal documentation.

Shopmonkey is out to develop a core operating system for car repair shops, not generally as gifted in financial administration as they are in mechanics.

BVP has also become a cryptocurrency convert by investing in NYDIG which wants to become a custodian and asset manager for digital assets. 

NYDIG is out to help family offices and institutions to buy and sell crypto, and provide prime broking services, such as leverage.

According to a BVP statement: “We strongly believe bitcoin will become a globally accepted asset class…bitcoin is poised to serve as “digital gold” and a hedge against future inflation.”

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