Milt Capps
Published Tuesday, September 2, 2008 6:59 am

VC Don Mundie isn't taking his eye off deal flow, but is focusing on senior executive recruitment

These days, Don Mundie, the venture capitalist who founded Delta Capital Management, applies his due-diligence skills to finding executives who can ignite portfolio companies and take high-tech companies to new heights.

Now, comes news that the high-stakes recruiter has found himself a new gig.

This morning, Craig Buffkin, founder of The Buffkin Group LLC in Franklin, announced that Mundie has become lead partner in the firm's venture capital and technology practice. Mundie previously played a similar role here for an Atlanta-based search firm, The Matteson Group.

Mundie's move to a second recruiting firm suggests he's not looking back.

Although he retains his interests in Memphis-based Delta Capital Management, Mundie told VNC, "I really don't see going back to venture capital."

Mundie explained that in his view opportunities for venture-capital funds under $25 million are shrinking dramatically. At the same time, VCs' increasing impatience with management shortcomings in portfolio companies is placing added premium on finding the right executives for each venture.

Mundie said that in the Southeast "it's going to be very difficult to successfully run a fund that's less than $75 million."  The reason, he said, is mainly that there are few institutional investors in the region who are willing to take a role greater than 10 to 15 percent of the fund total. In addition, he said, the slowdown of M&A activity due to the credit crunch means "fewer funds chasing the deals that are out there, [resulting in] a lot more partnering on deals," and bigger hurdles to face in achieving targeted returns for investors.

The upside for Mundie:  The quality of management teams in venture-backed companies has never been more important. "In the venture business," he said, "people tell you all the time:  you really invest in management teams, as much as you invest in the business model... By definition," he continued, "in venture- and private equity-type companies there's always a lot of transition in the executive suite, whether things are working well, or not working well... If it's not working, you try to get people who can reenergize the firm and try to get the [business] model to start clicking." In contrast, if the business "is working, it's growing and it needs to add positions."

Mundie continued, "The part of this business that really gets my juices flowing is when you first meet with a company and you say, 'Tell me about your business'." From that point, he said, the executive recruiter's due-diligence effort -- the attempt to learn the company's "DNA," or the "secret sauce" or simply what seems "unique and different" about the company is similar to that employed by prospective investors. At the end, instead of writing a check, you recruit a candidate.

Mundie, 49, stressed that he is keeping his hand in deal flow and referrals. Also, he retains financial interest and oversight responsibilities in Delta Capital funds he helped create within the Memphis-based VC. Delta holdings have included Windsor Health Group (Brentwood) and SmartFurniture (Chattanooga). Since 1992, Delta Capital has made 35 investments, drawing upon a total $92 million under management.

Mundie moved to Middle Tennessee from Memphis more than a year ago, as part of a plan to monitor some Delta portfolio firms more closely while building a VC-private equity line of executive-search business for The Matteson Group. Delta Capital portfolio company EcoSmart Technologies is a long-standing Matteson client.

Mundie said he came to believe that relocating to Atlanta would be inevitable if he stayed within the Matteson organization. He and his wife wanted to remain in Middle Tennessee.

In separate interviews with VentureNashville, Mundie and TMG CEO Bill Matteson each spoke of their high regard for one another, and indicated future collaborations are possible. Matteson said his own firm will "absolutely" continue to operate in Middle Tennessee. Prior to Mundie's joining Matteson, that firm's Atlanta-based executives covered Tennessee.

Mundie started at The Buffkin Group on July 1. In addition to pursuing business with venture capital firms, private equity funds and equity-backed companies, he now now also leads the firm's technology practice. Tech assignments were previously led by Managing Partner Buffkin and Partner Roland Lundy. Lundy, who is a former CEO of Word Entertainment, continues to oversee his primary media-publishing, nonprofit and general-management practices.

Prior to forming Delta Capital, Mundie served in the investment banking group of Union Planters National Bank, and was a consultant with then-Ernst & Whinney in Memphis. During those years, his duties often included structuring and placement of debt and equity transactions designed for banks, insurance companies and pension funds. He earned his MBA and his bachelor's in management at Mississippi State University. ♦