IVCA Profile: Keith L. Crandell, Recipient of the 2019 Stanley C. Golder Award at the upcoming IVCA Awards Dinner

IVCA Profile: Keith L. Crandell, Recipient of the 2019 Stanley C. Golder Award at the  upcoming IVCA Awards Dinner

November 21, 2019

As the year concludes, it’s time for the IVCA Awards Dinner … the 2019 edition will take place December 9th at the Four Seasons Hotel. The recipients of those upcoming awards have been named, and the Stanley C. Golder Award – which honors individuals who have made profound and lasting contributions to the Private Equity and Venture Capital industries in Illinois – will be presented to Keith L. Crandell, the Co-Founder and Managing Partner of ARCH Venture Partners, and a VC/PE industry supporter and board member of several vital institutions and organizations.
 
Keith L. Crandell accomplished three areas of education in his early life, starting with a Bachelors of Science in Mathematics and Chemistry at St. Lawrence University. He added a Masters of Science (Chemistry) at the University of Texas at Arlington and an MBA from the University of Chicago (where he later served as a Polsky Council member). In his early career, he worked for Hercules Inc., a specialty chemical and polymer company.
 
Mr. Crandell is a Co-Founder and Managing Partner of ARCH Venture Partners, a 30-year-old seed and early stage venture capital partnership with offices in Chicago, Austin, San Francisco, Seattle and Dublin. Now investing from Fund X, over its life ARCH has raised $4.4 billion to invest in disruptive science with as little as $50K and as much as $150M per company with Portfolio Companies and Limited Partners located all over the world.
 
Founded as a partnership between Argonne Labs & UChicago, ARCH Development Corporation was formed in 1986.The partners spun out of UChicago in 1992 to create ARCH Venture Partners.The firm takes a multi-stage approach to its investment strategy, though it remains an early-stage investor at its core. In part, its larger fund sizes enable the firm to invest early and maintain their stakes throughout the venture lifecycle.
 
Besides the aforementioned Polsky Council, Mr. Crandell is a board member of the Chicago History Museum, the Clean Energy Trust, on the Advisory Council of the University of Chicago Pritzker School of Molecular Engineering and the Illinois Growth & Innovation Fund (ILGIF). He has been an advocate for the VC/PE industries through the Partners Innovation Fund (the VC fund of Harvard University Affiliated Hospitals), the NVCA (former Director) and as a former Chair of the IVCA and the IVCA-PAC.
 
Mr. Crandell has a high reputation for mentoring young investors, and is an avid hunter and outdoorsman. His commitment to outdoor causes extends to his seasonal work as a Yellowstone National Park Law Enforcement Ranger.
 
Three colleagues submitted the nomination of Keith L. Crandell for the Golder Award, Robin Painter of the Private Funds Group, Kevin Knopp of 908 Devices and Clint Bybee of ARCH Venture Partners.
 
Robin Painter said this in his nomination submission, “What strikes me the most about Keith is his absolute dedication to embodying the highest ethical standards in all elements of his personal and professional life. Keith has a unique ability to analyze and manage issues objectively and with a complete absence of self-interest, and always in furtherance of the long-term objectives implicated by the issue at hand.

He is actively sought out by stakeholders throughout the Venture Capital ecosystem  – myself included – for his impeccable judgment and thoughtful guidance. Keith is a true leading light in our industry and I am proud to call him a friend.”
 
Kevin Knopp added this statement, “I believe his success has a foundation in Keith’s innate ability to build and support founding/management teams through all stages of a company’s lifecycle. I have observed Keith patiently – and equally – coach individuals and teams on issues pertinent on reaching scale to a three-person startup or a 100+ person company. Keith’s adherence to the highest ethical standards, his integrity, and his outstanding investment track record make him an excellent choice for the 2019 Stanley C. Golder Award.”
 
Finally, ARCH colleague Clint Bybee said, “I have known Keith since 1988 when we met at the University of Chicago, and have worked with him as a partner for over 30 years.  He is a great partner because he is a great investor and a man of action. He is decisive, focused on execution, and great at working with management teams to build companies.
 
Keith believes in giving back and he has been super generous with Yellowstone Park, the University of Chicago and other local charities. He was one of the original founders of the IVCA and has been a leader in the Chicago VC community for decades. Keith is not a person who seeks recognition, but he is the right person to recognize with the Stanley C. Golder Award.”
 
The IVCA got the opportunity to get some insight from Keith L. Crandell himself, in the following Q&A profile.
 
IVCA: When the roots of ARCH Venture Partners began in 1986, did you envision that someday it would become a standalone fund? And at the time were you thinking of a scope or evolution beyond Argonne and UChicago?
 
Keith L. Crandell: The short answer is no. In 1986 I was a University of Chicago [now Booth] first year MBA student who had worked heads down in the chemical industry for several years. I understood how new products created value but was not familiar with the Venture Capital process. Our leader and CEO, Steve Lazarus – along with a group that included Bob Nelsen, Clint Bybee and I – felt the mission of ARCH Development Corporation of commercializing leading research from the University of Chicago and the Argonne National Lab was very important.
 
Steve, who had done a listening and learning tour with a number of prominent VC people on the East and West coast, knew early on that the start-up process would require capital to achieve significant success. Between 1986 and 1988, when we began fund raising for ARCH Venture Fund One, we were focused on the now obvious need for venture capital. We had started several companies and could not scale them beyond the proof of concept stage without more resources.
 
At that time, Venture Capital was just becoming an institutionally validated ‘asset class,’ with perhaps a billion in capital across all stages of venture per year in new capital raised in the United States … and seed VC was the step child of the sector. Many investors, with some evidence, thought seed VC difficult and unwise. Science-based seed VC was the unproven red-headed step child of the sector.
 
IVCA: When the time came in the early 1990s to spin out to form ARCH, what was the process behind that decision?
 
Crandell: We had a friendly separation from the University of Chicago. By the early 1990s ARCH had started and funded about a dozen companies. The ARCH portfolio was showing operational progress but all investment gains were unrealized. The fully invested first fund raised the question of a follow-on fund.
 
The University had been remarkably patient and supportive over the initial five or six years of the ‘ARCH Experiment.’ However, some constituencies felt the ARCH activity was not necessarily core to the University mission. ARCH had worked with many researchers and universities around the U.S. in consolidating intellectual property for the portfolio companies we had started. We were confident we could navigate the larger arena as an independent venture fund.
 
IVCA: What, in your opinion, has been the biggest game changer in the Venture Capital industry, from where you began in the eighties to the present day?
 
Crandell: In our Venture Capital niche at ARCH, the first game changer is that the science has become mind bendingly strong in certain fields over the last two decades. This science creates new knowledge and opportunity which is our raw material for new company formation.
 
The second game changer is globalization of innovation and venture. We initially were opportunistic in the development of our international relationships. However, we quickly became more focused on developing lasting relationships with entrepreneurs, limited partners, strategic corporate partners, management teams, co-investors, leading researchers, cross over investors, customers, public stock buyers and research institutions around the globe.
 
For example, in our second fund important early LP commitments came from the University of Chicago endowment and also from Taiwanese investors. Much of our work today is weaving together interested parties from our network around the world to create a new company which can become a global leader in its category.
 
IVCA: The VC funding model you were heavily instrumental in developing at ARCH was the ‘company creation’ approach. What were the roots of that model, and how did it fit with the type of investments that you were pursuing at the time?
 
Crandell: We had to learn the business of company creation out of necessity. The two most important concepts that differentiate ARCH’s role are co-founding the new company and leading the financing of the new companies. There are many times the number of investment firms that are prepared to follow but few that will catalyze the new company formation by co-founding and leading.
 
We have tried to give ourselves every advantage today, but we still co-found and lead the vast majority of the companies we invest in, which is not the easiest way to make money. The better and easier way to make money, I suppose, would be to do no work and make a ton of money. However, I think those good opportunities have all been taken so we work very hard and have stuck with what we know.
 
IVCA: Since you are known for your mentorship of young investors, what do you think should be improved at the college level, both undergrad and MBA programs, to make potential investors better prepared to do the work of growing companies?
Crandell: Important parts of the art and practice of seed Venture Capital and entrepreneurship are best learned through clinical experience or an apprenticeship. We have been active with the Polsky Center at Booth for many years and through both the PE/VC Lab and Lab-to-Launch courses, essentially providing a clinical internship in seed VC and entrepreneurship for graduate students.
 
If the students have a reasonable level of experience and skills, along with two years of part time work with ARCH, that will usually position them for a job in Venture Capital or with start ups when they graduate. We have seen this work well over and over. It was been very rewarding to see these young people succeed.
 
IVCA: Like Theodore Roosevelt, you have combined your business acumen with a love of the great outdoors. How has interacting in and protecting our natural environment as a Yellowstone National Park Law Enforcement Ranger, for example, given you a better perspective on how you approach the business side of your life?
Crandell: To serve the public, help sort out problems and protect natural resources is very rewarding. I have had the opportunity to work for the National Park Service since 1981, mostly in Yellowstone National Park. Backcountry Ranger responsibilities include emergency services, search-and-rescue, firefighting/structural and wild land emergency medical services/law enforcement.
 
On backcountry patrols in the remote wilderness are often minor, but sometimes it’s major, and challenges emerge in those disciplines. There is a premium in those situations on initiative and independent action. I think those same attributes serves me well, or would serve anybody well, when working on start-ups in the business world.
 
IVCA: Ranger patrols must differ substantially from business in the city.
 
Crandell: In Venture Capital we pretty much move from one group to the next of clean, educated, well fed, polite [mostly], healthy, motivated and upwardly mobile individuals. If you encounter that enough times you could almost begin to think the whole population is like that. But in working emergency services I often spend time with a part of the fellow populace that is often disadvantaged, have made poor choices or are just unlucky… or a combination. I feel fortunate that my business and personal life, and that of my colleagues, have worked out as well as they have. I know that the outcomes could – by a twist in circumstances – be very different.
 
I have had the privilege of working with some truly outstanding Rangers at times and places where they could make a difference. Once you see leadership like that, you never forget the standard those individuals set.
 
IVCA: You have a track record of giving back to civic organizations, in Chicago and beyond. How has that service benefited you and ARCH? And how important, in your opinion, is the emphasis on balancing investment success with givebacks to the community for the overall VC/PE communities?
 
Crandell: We have tried to involve all of ARCH in some facets of community service. There is much civic impact in sharing the intelligence and energy of VC and PE in the improvement of philanthropic activity. I believe it is harder to make progress relative to the private sector, but it’s also completely worthwhile.
 
IVCA: As the 2019 recipient of the Stanley C. Golder Award, what does it mean to you personally to be recognized by your peers in the Venture Capital and Private Equity industries, especially since you have served as a Chair of the IVCA?
 
Crandell: I am very grateful and appreciative for the recognition of the Stanley C. Golder Award really for the ARCH team effort. It is clear to me that the grizzled veterans of the industry, of which Stanley was one, pioneered the practices and advocated the regulatory structures that contributed to the tremendous industry success across the country. This work was done so long ago, and has been so successful since then, that it is almost difficult to remember the a struggle to create it.
 
When I was starting out as an underling in the profession I took all that foundational structure as an article of faith. I have since learned how constant vigilance and education is required to ensure that the industry can continue to fuel innovation and economic growth. The very foundations of the industry can be adversely impacted in a very short period of time in today’s environment.
 
The IVCA plays a critical role actively educating and advocating for the VC and PE industries in Illinois, in essence continuing the work of Stanley Golder and others. I have always felt the IVCA has had our backs at ARCH … Maura, Kathy and the team has done and keeps doing whatever it takes to get to the right endpoint on the critical issues of our time.
 
The IVCA Annual Awards Dinner will be December 9th, 2019, presented by Kirkland and Ellis LLP, at the Four Seasons Hotel in Chicago. For more information, including tables/tickets to the event, click here.