Bain Capital’s Kiva Investment Lifts Venture Profile in Silicon Valley

Photographer: Beth Hall/Bloomberg

Kiva Systems Inc. robots sit at an Acumen Brands Inc. warehouse in Fayetteville, Arkansas.

The best way for a venture capital firm to make a splash in Silicon Valley is to turn a signature investment into a big time profit. It looks like Bain Capital Ventures has arrived, thanks to Amazon.com’s $775 million acquisition of Kiva Systems.

Last summer, Bain opened an office in Palo Alto, California, expanding West after 27 years in Boston and New York. Ajay Agarwal, who joined the firm in 2003, is heading up the Silicon Valley operation, where he’s competing with legendary firms like Kleiner Perkins, Sequoia Capital and Benchmark Capital to find the most promising young entrepreneurs.

That’s not an easy task. While Bain Capital, co-founded by Republican presidential candidate Mitt Romney, is among the most prominent private equity firms in the country, the venture arm hasn’t had a big presence in early-stage tech investing. Even LinkedIn, which counted Bain as one of its largest investors when the company went public last year, carried an asterisk because Bain didn’t take part until the fourth financing round.

Kiva is a different story. Bain is the largest shareholder and first invested $6.5 million in late 2004, the year after Kiva was founded by former Webvan executive Mick Mountz. Kiva makes robots for warehouses, helping companies like Staples, Drugstore.com and Gilt Groupe automate the boxing and distribution process. The acquisition is the second biggest for Amazon.com, behind its purchase of online shoe seller Zappos in 2009.

Still, Bain has work to do to establish itself as a player on the West Coast. While Kiva is well-known in Silicon Valley, the company is based near Boston. AppAssure, a Bain-backed company acquired by Dell last month, is located in Arlington, Virginia.

In an interview last month from his new office, Agarwal said Bain’s venture arm has a compelling pitch to Silicon Valley entrepreneurs. First, it has fresh capital — the firm raised a $600 million fund in January. More importantly, Bain Capital is a recognized name and has worked with many of the world’s largest companies. Need an introduction to a potential customer or business partner in a far away land? Agarwal says that can be arranged.

“The Bain Capital brand name gets us into the C suite of any large company,” he said. When it comes to finding partners, “most great entrepreneurs out here don’t need help in the Valley.”

 

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