From Office Products to VC

When OfficeMax Inc. Co-Founder and CEO Michael Feuer sold his company to Boise Cascade Corp. last week for about $1.3 billion, he didn’t toast the deal by popping open champagne.

Instead, Feuer went out to eat and got a hamburger. Then he brought it home as takeout.

“I was out of work for about five minutes,” he jokes. “But then I was back to work on something else.”

Feuer’s new plan, announced the same day that Boise closed its acquisition of Cleveland-based OfficeMax, was to join up with Ralph Della Ratta, former senior managing director and manager of investment banking at KeyCorp’s McDonald Investments, to form Max-Ventures LLC. This new venture capital/operational firm, based in the Cleveland suburb of Mayfield Heights, will invest in specialty retailing businesses nationwide.

Max-Ventures will work with emerging growth companies and new retail concepts, as well as mid-size retailers and businesses providing services to retail chains. Investments will be made in companies that may require an infusion of new capital, but more importantly, strategic and operational expertise to take a business to its next growth stage.

Feuer declined to describe what types of retailers Max-Ventures would invest in, but he did sign a non-compete agreement as part of the Boise acquisition, which will keep him out of office products.

He said last week that his firm was already conducting due diligence on a few companies and that the deal announcements will probably be made in early 2004.

Though he refers to his new enterprise as a VC, Feuer is quick to acknowledge that his firm is not like an ordinary VC. He will not operate a fund, but will instead make investments from his own wealth. The size of investments will vary, and he says it’s possible he would invest in a public company. He also hopes that each time he puts money into a company it’s in a partnership with a private equity or venture capital firm. In addition, Feuer wants Max-Ventures to take on operating control of the businesses by assuming at least a 50% ownership in each investment.

“Most startups hit a wall after a while,” he says. “They run out of money or they just need that expertise to take them over the hump and help them expand. That’s what we’re going to offer them.”

Feuer says the idea for starting his own investment firm has long been a dream of his, born out of the close relationship he’s had from investing in other businesses and from starting his own companies. Feuer says he’s been a private investor for some 20 years, having invested in Zany Brainy and Caribous Coffee, among others. He says he was also an early investor in Dick’s Sporting Goods Inc., which launched an IPO last year.

Besides investing in retail, Feuer has 30 years of operating and starting retail companies. OfficeMax opened its first superstore in suburban Cleveland in the summer of 1988 with $20,000 of Feuer’s own money, combined with investments by a small group of investors. OfficeMax has since grown to become one of the top specialty retailers nationwide, with sales approaching $5 billion.

“I believe my background, together with Ralph’s vast financial and capital markets expertise, will enable Max-Ventures to recognize opportunities and infuse the missing ingredients into many startup companies,” he says.

Della Ratta has over 26 years of investment banking and venture capital experience, including the last 16 years at McDonald, with the most recent 11 years as head of its investment banking group.

Feuer and Della Ratta have worked together for over 10 years. Della Ratta served as an advisor to OfficeMax on, among other events, the company’s IPO in 1994 and its sale to Boise.