Tuesday, October 21, 2008

Tim Keyes of Keyes Capital Talks about His Startup Experience in Austin and His New Endeavor

What do you do?

I work for two different family offices. The first is Lubar & Co. which has its primary office in Milwaukee and the second is Keyes Capital which is based here in Austin. Both groups are focused on buying existing, profitable operating companies and also investing in real estate.

What is a family office?

Family offices invest money on behalf of the families they represent. They are similar to a private equity firm or real estate fund but do not typically take on outside or institutional money. This provides them with great latitude in what they can invest in and allows them to exit investments only when appropriate and not a predetermined time frame.

How did you come to Austin?

I worked in Austin in the late 90’s for a start-up company I helped found. When things dried up here in the early 2000s I went back to Wisconsin where I was born and raised. The best part of my first go around in Texas was meeting my wife who I had to drag up North. After too many cold winters we decided to moved back to Texas and start Keyes Capital and expand the footprint of Lubar & Co. Although based in Milwaukee, Lubar has been a significant investor in the energy space and has numerous holdings in Texas.

What kind of investments are you guys looking to make?

We make primarily invest in established operating companies and secondarily real estate. Lubar looks at companies that have between 5 and 20 million EBITDA and for Keyes our target range is 1 to 4 million of EBITDA. Since both our family offices, however, we have the flexibility to go smaller or larger for some deals. Lubar has been operating for over 30 years. We made about 5 investments so far on the Keyes side.

How do you decide which deals to pursue?

We pursue deals in which we can add value from our network of contacts and our experience in working with small private companies. On the Keyes side that means primarily leveraging the relationships my father has as the ex-Chairman and CEO of Johnson Controls and currently on the Board of Fidelity, Navistar and Pitney Bowes. Both groups prefer to partner with existing management teams or owners who are looking to gain some liquidity and continue to grow their companies.

You were in Austin the 1990s. Who did you work with?

I was co-founder of a software company called AIM Technologies. We developed software that ran loyalty programs for sports teams and entertainment venues while simultaneously allowing advertisers to target ads, market research questions and coupons to our members based on their demographic profile. At our peak we had over 1 million members signed up in the programs from more than 100 different venues.

What did you learn from that experience?

Like many companies in the late 90’s we grew too quickly and did not do a good job matching revenue and expenses. Despite having some operational success, when the funding dried up in the venture community we were not able to raise the adequate funds to get to profitability.

What would you do differently if you had those days to live again?

We would have not tried to grow so quickly. Given the acceptance of our program by teams and members we probably could have survived by not taking on so many venues at once. Each venue was a large capital outlay which generated profits in the outer years of our contracts. We took on so many with the belief that funding would always be there and when it was not we were stuck.

What do you find most enjoyable about Austin?

We have two children age 8 and 5 so they keep my wife and I very busy. Unlike Wisconsin we can enjoy the outdoors year round and try to take advantage of that with them. I also have lots of friends from my AIM days here in town so it has been great to get back together with some of them and see the success they have had in other companies.

Best regards,
Hall T.

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