Key Opens Boston VC Shop

Cleveland-based KeyCorp. recently approved a plan that would move most of its venture capital operations to Massachusetts. The relocation had been discussed internally for the past few months, and will commence later this summer with the most likely landing spot being somewhere on the Route 128 corridor.

;This is really just a case of moving closer to where the action is,” says Ron Petrie, vice president of public affairs with KeyCorp.

It’s also a case of maturation. Key launched a private equity subsidiary named Key Principal Partners in 1998, but it was mostly focused on very late-stage and buyout deals. The venture effort grew more organically – and more slowly — following the hire of David Dame, whose background had been in next-generation Internet investing with IBM. Dame began investing in a few select venture deals here and there, and eventually had a dedicated staff of six professionals spread over three locations – Cleveland, St. Louis and Greenwich, Conn.

Of those six, only Dame and Vaibhav Nalwaya (an associate since 2000) are confirmed to join the reconstituted Boston team. Two other Key venture investors may also come along, while one will stick with the buyout group and another will probably leave the firm altogether. Dame will serve as co-managing director, alongside a veteran Boston venture capitalist who already has been identified, but not yet named. Also involved will be Joseph McCullen, a Boston-based venture capitalist who has worked for Key on a retainer-based advisory level for several years. McCullen is currently head of McCullen Capital, and was previously a managing director at both Whitney & Co. and One Liberty Ventures.

The new outfit eventually may be dubbed Key Principal Venture Partners, and still has $100 million in dry powder available to invest in mid- to late-stage information technology and communications deals. There have been no decisions on what happens when its coffers run dry, but a third-party fund raising campaign is possible.

The move is not expected to substantially affect Key Principal’s buyout business, which will remain in Cleveland and maintain its full staff.

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