A former partner of Bain Capital has launched a $700 million buyout fund in San Francisco that counts Bain's former chief Mitt Romney among its investors.
David Dominik left Bain Capital of Boston last spring to start Golden Gate Capital, along with Jesse Rogers, a former executive of Bain & Co., the consultancy that spawned Bain Capital in 1984. They took a year to close their new fund, which aims to invest in growing, midsize companies.
Bain & Co. is investing in the fund, along with a list of blue-chip endowments from Harvard and Yale universities to the MacArthur Foundation. "We will not be competing" with Bain Capital for deals, Dominik said, but focusing instead on $100 million deals that fall below Bain's radar screen.
Dominik, 44, said he wants to pursue the kind of technology investing he used to do at Bain Capital before the firm entered the megadeal arena. His partner, Rogers, 43, brings to the table investment experience and consulting expertise from Bain.
"They're trying to use the Bain model, with a narrower niche," said David Toll, managing director of Private Equity Analyst, a trade publication. "They're going to take a very hands-on consulting approach, too."
Dominik is the latest of several Bain Capital partners to strike out on their own since Romney took a leave of absence in 1999 to head the troubled Salt Lake Organizing Committee for the 2002 Winter Games.
Geoffrey Rehnert, a founding partner of Bain Capital, started Audax Group in July 1999 with several former Bain colleagues. The Boston firm now manages nearly $1 billion in private equity.
"You reach a stage in life where you decide that you want to have your own business," said Marc Wolpow, co-chief executive of Audax. And the departure of Romney, a strong leader who unsuccessfully challenged U.S. Senator Edward M. Kennedy for his seat in 1994, seemed to weaken the firm's hold on some partners.
"When Mitt had granted himself a third successive leave of absence, that set everyone in the firm thinking about what they wanted to do," Wolpow said. "Coincidentally, a lot of partners were around 40 years old."
Bain Capital managing director Steve Pagliuca said the firm has seen remarkably little turnover in its 16 years. "We're proud of the fact that Bain Capital alums can be successful in different market niches," he said.
Bain is one of the nation's biggest private equity firms, with 26 partners and $12 billion under management. Its past deals include Staples, Datek Online Holdings and Fresh Samantha juices.
Having Bain on their resumes helped the Golden Gate founders raise money at a difficult time in the market.
"I think we were somewhat naive last April," Rogers said. "I don't think we realized what kind of storm we were walking into."
April marked the beginning of the NASDAQ Stock Market's sharp dive and the end of a golden era for venture capitalists. When the stock market is in the dumps, it's harder to reap fast returns by taking companies public. Many specialists believe that presents an opportunity to buyout firms, which deal with more mature companies that need to revamp their management or look for a larger corporate owner.