As Ann Arbor-based Arbor Partners, one of Michigan’s oldest venture-capital firms, winds down its investments, two of its principals have formed relationships with MK Capital, a growing Chicago VC firm that wants a bigger presence in Michigan.
Josh Beebe, a partner at Arbor Partners, is now a director at MK Capital, will oversee its health care portfolio and help find portfolio companies in Michigan. MK raised $150 million for its first fund and is raising a second fund of about $100 million.
Beebe will continue as a partner at Arbor Partners and serve on the boards of two of its portfolio companies. He has begun vetting potential investments for MK, but nothing is imminent, and he has joined the board of one of MK’s portfolio companies, Colorado-based Junction Solutions, a provider of software to help retailers manage accounts.
Don Walker, one of Arbor’s founders in 1996, will help MK Capital raise money for its fund, help find companies MK can invest in and serve as an adviser or board member as needed for MK’s local portfolio companies. Unlike Beebe, he is not an MK employee.
Chris Rizik, CEO of the Renaissance Venture Capital Fund, liked the relationship between Arbor’s principals and MK Capital enough to recently commit $3 million for MK’s new fund. MK focuses on digital media, data center automation, software and education technology.
MK has one portfolio company in Michigan, Southfield-based Outside Hub LLC, an advertising platform that links hundreds of websites for outdoor enthusiasts. It invested $4 million in the company last year.
“Don and Josh have a lot of experience. They’re bright guys, good guys. It makes a lot of sense for MK to reach out to these guys,” said Rizik. “The area in which MK focuses, IT, is underserved by other local venture firms. They aren’t flashy, but they are very, very solid fundamentally in what they do. They make their investments, they work very hard at them, and their background shows they can be very successful.”
In December, MK sold one of its portfolio companies, Indianapolis-based Aprimo Inc., a maker of marketing software, for $525 million. “It was a very good Christmas,” said Mark Koulogeorge, one of MK’s managing general partners.
“Once Arbor decided not to raise a new fund, this was an opportunity for us, and I’m really excited about the relationship,” said Koulogeorge. He and Walker met in 2002 and have served on the same board of directors of one of Arbor Partners’ investments, Alpharetta, Ga.-based Knowlagent Inc., a maker of software for call center management.
“This brings a large pool of money to Michigan,” said Walker. “They focus on underserved technologies and understand how to build companies. IT used to be the rage in Michigan, but now everything’s going to life sciences.”
“Not only are we seeing great deals, but there’s relatively little competition,” said Koulogeorge.
Arbor Partners was founded by Walker, Richard Crandall and Richard Eidswick, three former executives of Ann Arbor-based Comshare Inc., a provider of time sharing on mainframe computers before the PC and Internet eras. Crandall founded Comshare in 1966 and later took it public.
In 1990, Eidswick and Walker founded Network Express Inc., a high-flying local tech company that went public on the Vancouver Stock Exchange in 1994 before being sold to Cabletron Systems Inc., a New York Stock Exchange company.
Eidswick was the founding president of the Michigan Venture Capital Association in 2002.
Arbor’s first fund of $5.5 million returned $26 million to investors. The second fund in 1999 raised $32.5 million and has had several successful exits, including the 2008 sale of Okemos-based Sircon Corp., a maker of software for the insurance industry.
Eidswick and Crandall will still be involved in Arbor Partners as it grows and eventually seeks to sell its three companies, but will not be associated with MK Capital.
Eidswick is 74, Crandall 67 and Walker 70. Beebe is 37.
“We’re all getting a little long in the tooth. Once we decided not to do a third fund, this was an opportunity to find Josh a home, and it allows us to keep him on as the fund winds down,” said Walker.
“Joining MK has allowed me to continue in a business that I enjoy immensely, as well as maintain my Michigan roots,” said Beebe. “I think we are in the early stages of an increasingly vibrant entrepreneurial economy in the state, and I’m excited to be a part of it.”