Santa Barbara Venture Partners is a Santa Barbara-based venture capital firm that invests in software companies and helps portfolio companies accelerate marketing and customer acquisition through its 100+ LP expert network. The VC firm has a unique approach to VC in that it believes in producing ongoing liquidity and cash distributions for its Limited Partners, and has already completed eight successful exits after just five and a half years, a huge industry outlier in terms of performance. Pulse 2.0 interviewed Santa Barbara Venture Partners Founder and Managing Partner Dan Engel to gain a deeper understanding of the firm.
Dan Engel’s Background
Could you tell me more about your background? Engel said:
“Outside of my VC and investment management experience, my background includes leading customer acquisition at various tech firms, such as Google, GoToMeeting, Picasa, and FastSpring. It’s not a coincidence that our key point of differentiation at Santa Barbara Venture Partners is that we help our portfolio companies with customer acquisition and marketing, thanks to our over 100 LPs who are largely marketing and sales executives. Our portfolio company CEOs often share with us that we are their largest value-add investor despite not being their largest investor, and we take pride in that.”
“SBVP’s LPs provide the portfolio with expertise in over 25 different marketing and customer acquisition channels and methods to accelerate revenue growth. LPs include leaders from Adobe, Google, Procore, AppFolio, Snowflake, Salesforce, Zoom, RingCentral, CBS, and Pinterest, among others. LPs work with portfolio companies on demand generation, sales, and marketing, and supercharge product marketing, revops, audio/TV marketing, content, social media, SEM, media buying, account-based marketing, customer success, sales enablement, branding, strategic alliances, trade show marketing, and other areas. Beyond marketing and sales assistance, portfolio companies gain access to other SBVP investors who possess additional critical expertise, including the former CTO of Salesforce and the former President of Procore, who collaborate with SBVP companies on product architecture and operations, respectively.”
Evolution Of The Firm’s Thesis
How has your firm’s thesis evolved over time? Engel noted:
“It hasn’t changed much since we began in 2020. What we seek in our investments are software firms with $2-20M+ in (preferably recurring) revenue growing 2-3x or more per year that have truly outstanding client retention metrics. It’s been that way all along. We give a lot of credit to our thesis in helping us five years after we began be in a position where we are batting 1.000 on our 15 investments to date. It makes a big difference to enter the company post product-market-fit yet when they are still growing very fast and they have a long enough history of retaining nearly all their customers while greatly expanding revenue per customer.”
“SBVP typically participates in Series A through C rounds, or SBVP buys stock directly from existing founders or other shareholders. SBVP prefers investments in overlooked geographic markets such as the Midwest and Southeast, rather than Silicon Valley, that ideally have a positive impact on people and/or the planet although it’s not a requirement. Investments include: Automotus, Bark Technologies, BuyerCaddy, Classy (acquired by GoFundMe), Curri, Hydrosat, Jackpocket (acquired by DraftKings for $750M), Meez, Nice Healthcare, Orca AI, Rad AI, Rwazi, Specright, Spin (acquired by private equity), and Voltaiq.”
Significant Milestones
What have been some of your firm’s most significant milestones? Engel cited:
“Fund 2 has invested $7.1 million of capital thus far, which has grown to an estimated value of $11.6 million, placing the Fund in the top 10 percent of performance for all U.S. Funds of its vintage, according to Carta. That’s a performance milestone we are proud of.”
“Just last week we hit a milestone in that one of our companies reached $120 million in ARR, a firm that when we invested had $10 million in ARR, so that’s been a recent milestone. Also, having all 15 of our 15 companies performing well after 5 years of being a firm. And that in our 5 years we’ve had 8 exit transactions already, including the sale of Jackpocket for $750 million to DraftKings last year and a billion-dollar valued sale of one of our firms to GoFundMe. Typically, in a VC fund’s first 5 years, they have zero exits, so we’ve very much been an outlier.”
‘’Most VC firms celebrate their very first exit in years five or six, while Santa Barbara Venture Partners has had eight successful exits in about five years,’ said Dan Engel, Founder and Managing Partner, SBVP. ‘Our consistent track record of outperformance, differentiation through our customer acquisition and marketing value-add offering, and unique strategy of continuous liquidity played a major role in raising Fund 2 in an otherwise difficult fund-raising climate for emerging VC Fund managers.’”
“Another milestone was getting major press coverage in the last year, with the Wall Street Journal featuring our unique strategy and record of liquidity events and exits in a market lacking liquidity for most VCs and their Limited Partners.”
“SBVP has also completed sixteen special-purpose vehicle (SPV) transactions, returning up to 60 percent of capital to LPs in four of the SPVs within five years. The SPVs have an aggregate cost of $11 million and are now estimated to be valued at more than $23 million.”
Investment Success Stories
Would you like to share any specific investment success stories? Engel highlighted:
“Some are above, but others would be that the valuation of one of our firms recently rose from $60 million to $525 million over 3 years (and we partially exited it), another from $40 million to $225 million, and we recently sent cash back to our investors.
AUM
Can you discuss total AUM? Engel pointed out:
“We manage about $75 million in assets today.”
Industry Focus
What are some of the industries that your firm is focused on? Engel noted:
“Mostly software firms across all sorts of different industries. To date, industries include cybersecurity, restaurants, CPG, data, maritime, health care, etc.”
Differentiation From Other Firms
What differentiates your firm from other firms? Engel emphasized:
“For companies, it’s our ability to help them with customer acquisition, marketing, and sales through our 100+ fund investors who are largely sales and marketing executives. We recently helped increase revenue for one of our companies by 6x in 90 days by helping them with price experimentation.”
“To our investors, it’s our unique strategy of generating continuous returns in an asset class otherwise plagued by illiquidity challenges.”
Future Goals
What are some of your firm’s future goals? Engel concluded:
“Our financial goal is to continuously produce industry-leading results for our investors in terms of liquidity in the short term, combined with long-term performance metrics in the top 10-25% of our field.”
