i-STREET PERSON OF THE WEEK; KEITH BANK

By Jessica Littmann,
i-street magazine
Published: January 2001

Keith Bank, managing director at Chicago venture capital firm KB Partners, describes his firm as "an entrepreneur to entrepreneur" venture.

It's an apt tag line where Bank is concerned. Before founding KB Partners with partner Byron Denenberg, Bank spent his career in real estate, building shopping and industrial centers and investing in private deals on the side.

"After a while, one shopping center starts to look like the next," Bank said, explaining his decision to get in on the new economy in 1996. Bank was first intrigued by venture capital while studying for his M.B.A. at Northwestern University in the mid-1980s and enrolled in a seminar on the topic. At that time, however, " venture just wasn't the 'in' track," Bank explained.

The timing was better in the mid-1990s, and Bank, who described himself as a "voracious" reader of business periodicals, discerned that the new economy was coming to the Midwest.

Bank's intuition motivated him to get in touch with partner Denenberg, a veteran of the semiconductor business and an avid investor in private deals himself. The two launched the firm in 1996 as KB Partners-a name that Bank said he would change if he had the chance to start over. "People think it stands for 'Keith Bank,' when it's really 'Keith-Brian,' he explained."

The firm was launched with a deal-by-deal round of funding "to establish credibility," Bank said. Three deals were funded that way, and then KB Partners established its first fund, with a total of $24 million from investors that included Home Depot CEO Arthur Blank. Fund II had its first closing in June 2000, and now has $65 million, with an anticipated $75 to $85 million by the final closing in March.

KB Partners typically does only early-stage investments, participating at what Bank called "the riskiest stage of the game." For Bank, who finds the diversity of ideas and the intellectual stimulation of sorting through them invigorating, early-stage investments are also the most exciting part of the process. "We see a lot of the same ideas," he admitted, "but the good ones always stand out, and some of it is society-changing stuff."

To date, the firm has funded 11 startups including EthnicGrocer (www.ethnicgrocer.com), Dynamic Trade (www.dynamictrade.com), and robotics firm CoMoCo (www.comoco-inc.com). KB Partners focuses exclusively on the Midwest, funding deals within a 300- to 500-mile radius of Chicago.

"I've always been a zigger and zagger, and this business gives me a chance to do that," Bank said, explaining that he functions as the firm's general manager, a deal sourcer, and "the outside guy who runs the firm day to day."

He candidly admitted: "I'm not a technical guy," adding that the other partners deal with the technical aspects of deals, and "business is similar no matter what kind of business it is." Bank described venture funding as more of an art than a science: "It's all about judging people, and judging trends."

Between the four partners, the firm reviews more than 7,000 business plans annually, eventually funding just a mere handful. From his experience culling the most attractive deals, Bank took issue with the "cry-babies" who bemoan the lack of funding in Chicago.

"Firms that can't get funded here just don't have good ideas-or they have ridiculous valuations...I can't think of anyone we turned away that was a fabulous success after getting money elsewhere," he added, concluding, "We have no buyers' regrets."