Kinetic Broadens Staff –

Hires Three to Focus on the Internet and TelecommunicationsATLANTA/CHEVY CHASE, Md. – To keep up with its growing capital and evolving investment strategy, Kinetic Ventures in late February hired Charles Meyers as a principal, while it promoted Todd Klein to managing director and Nelson Chu to principal, said George Levert, the firm’s managing director.

Founded as Arete Ventures in 1983, the firm originally had focused on technologies related to the utilities industry. The firm changed its name to Kinetic in June 1999 to signal a strategic shift it made in 1997 with the launch of its Utility Competitive Advantage Fund, which solely backed companies in telecommunications, the Internet and customer services sectors, Levert said. The switch reflects Kinetic’s belief that these three areas will be key drivers in the development of the utilities industry now that government deregulation has opened the market to competition.

Meyers wanted to try venture investing to get a more hands-on approach to the enormous growth in tech companies in the Southeastern United States, and Levert hired him based on his broad expertise in the Internet and communications sectors. Meyers most recently worked at Atlanta-based Internet Security Systems (ISS), where he was vice president and general manager of the company’s eServices division after serving as vice president of business and corporate development. Prior to that, he was president and CEO at

Meyers expects to primarily scout information technology deals related to enterprise software, including business-to-business e-commerce applications, and infrastructure opportunities. The more senior investment staff will be responsible for fund raising, Levert said.

“Venture capital is a great way to see a diverse set of technologies and partners and still participate in the explosion of technology opportunities,” Meyers said, adding that he chose to join Kinetic because of its reputation and its commitment to accelerating investments in the Internet and e-commerce space.

Kinetic in December held a first $85 million close on its $150 million targeted Utility Competitive Advantage Fund II (VCJ, December 1999, page 18), and the firm expects to begin fund raising in the coming months for a new vehicle that will, for the first time, cater to institutional investors. Kinetic decided to expand beyond its traditional focus on utilities companies as its limited partners because institutional investors were eager to invest in its previous fund, which had returns “well into the triple digits,” Levert said.

Chu, who had been a senior associate, joined Kinetic in 1998, and Klein, most recently a principal, joined in 1994. The two men will continue to scout deals for the firm. The promotions and the hiring of Meyers also are a part of Kinetic’s broader vision of creating future heirs for the firm.

“The goal is to have all three of these guys progress to the point where they become full owners of the firm,” Levert said. “I’ve seen firms just blow-up because they did not think about how to transfer leadership successfully.” Levert said there were no other impending changes at Kinetic, but that the recent personnel moves were the beginning of a process of ensuring the firm’s longevity.

The remainder of the firm’s management team consists of managing directors Jake Tarr and William Heflin. Levert said he expects Kinetic will add another one or two members to its management team over the next year as the firm continues to grow. The Utility Competitive Advantage Fund II to date has made two investments totaling $13 million, Klein said.